George Osborne will abolish pension perk in tax bombshell, claims former minister

[AtW]

" Steve Webb, who worked with Chancellor on pension strategy, says Treasury is plotting reforms hitting hundreds of thousands

George Osborne is planning to abolish the tax-free lump sum on retirement incomes in a bid to raise £4 billion in lost revenue, according to a former pensions minister.

Steve Webb, who worked with the Chancellor on pension strategy in the coalition government, says the Treasury is plotting a "tax bombshell" that will hit hundreds of thousands of people.

Mr Webb says the current perk allowing people to access 25 per cent of their pension pots tax-free in a single lump sum when they reach 55 is "heading for extinction" in the budget next month

Osborne would like to scrap all tax relief on pension contributions and replace it with an Isa-style system, the former minister wrote in The Sunday Times.

In recent months, speculation about pension reforms has focused on proposals to equalise the rates of pension tax relief so that all taxpayers receive the same benefits. This would hit higher-rate taxpayers. (AtW's comment - all taxpayers should be paying same rate of tax then!)

But Webb, who now works for the pensions firm Royal London, said contacts with Treasury officials had convinced him that Osborne would like to take the more radical course.

Webb says: "I do not believe that the flatrate was ever the Treasury's first preference."

The Isa approach would mean "an extra tax bombshell" that "seems to have gone almost completely unnoticed", Webb writes, because it would scrap the tax-free lump sum.
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Source: George Osborne will abolish pension perk in tax bombshell, claims former minister - Telegraph

But as Waldorf would say - Labour would have done it anyway, so what's the problem?

MFs decision to put £140k into his pension pot beginning to look even better now - how many pension shaftings will happen before he retires?

Now vote in a poll...

[FatLazyContractor]

MFs decision to put £140k into his pension pot beginning to look even better now - how many pension shaftings will happen before he retires?

Now vote in a poll...

Better late than never. Impress his wife with your manly charms and get them to divorce

[centurian]

But as Waldorf would say - Labour would have done it anyway, so what's the problem?

Well it was Labour that renamed it from "Tax Free Lump Sum" to "Pension Commencement Lump Sum", so at the very least, they did tee-up Osbourne.

Steve Webb has form though - and given he's now speaking in a professional private sector capacity after having been sacked by the voters, his words need to be taken with a pinch of salt. I bet a few "Treasury officials" would happily wind him up with fake leaks - just for sport.

In the event that he is right, then already accrued rights would probably be protected - i.e. 25% of your current pot value as of budget day - which for most, is currently languishing at a low point in the cycle with the recent sell offs.

[MicrosoftBob]

In the event that he is right, then already accrued rights would probably be protected - i.e. 25% of your current pot value as of budget day - which for most, is currently languishing at a low point in the cycle with the recent sell offs.

Unless it's applied retrospectively, which of course never happens in reality

[AtW]

In the event that he is right, then already accrued rights would probably be protected - i.e. 25% of your current pot value as of budget day - which for most, is currently languishing at a low point in the cycle with the recent sell offs.

Protection should apply to all those who have made pension decision BEFORE budget day, ie - pots sized noted and old rules should apply to whatever was on that day OR optionally return all money back to those who made decision to invest. That should be the basic rule for pensions or any long term investments - after that Govt will start doing a LOT LESS screwing around.

[Waldorf]

This would be a positive step. The thing with pension saving is that the money going in is tax free, but the quid pro quo is that the pensioner is taxed when drawing the income in retirement. So based on that why should 25% be tax free?

I would support the general idea of a pension ISA, depending upon the details.

There is no way on earth that in the unlikely event of a Corbyn government, with McDonnell as Chancellor, that they wouldn't remove the tax relief on pensions. However we'll never know because just like atw's promised £10K donation to Labour, it will never happen.

[SueEllen]

Isn't it standard for the government to leak a few things. See the reaction and then do the one that gets people the least angry?

[ZARDOZ]

Hang on he brought the pension freedom rules in a couple of years ago, and now wants to change the terms now people have paid in? What an utter twat.

[DimPrawn]

Invest in property and the best divorce lawyers. Job done.

[ZARDOZ]

A few cynics thought the reforms were to raise a lot of tax from current 55+ year olds as they cashed in early, and it did. It was then predicted he might change the system to get even more tax. If he's so keen to balance the books why doesnt he just scrap 80 billion HS2 instead of 4bln from pensions?