I’m losing track of all the taxes that PM Keir Starmer and chancellor Rachel Reeves are aiming at the older generation. Now it looks like I need to add another one to the list.
Ten million pensioners will lose up to £300 towards their winter fuel bills this year, even as energy prices rebound.
If they need long-term care there’s an even bigger chance they’ll have to sell their home to fund it, after Reeves axed the planned £86,000 social care cap.
The real onslaught will begin when Reeves delivers her autumn Budget on 30 October. Her new adviser Sir Edward Troup wants her to go after “codgers”, and he’s not alone.
Yesterday, Starmer warned us the Budget will hurt and most of the burden looks set to fall on pensioners who did the right thing and saved money for their retirement.
Reeves is gearing up to hike capital gains tax and possibly inheritance tax, too. But it’s looking like her number one target will be the nation’s pensions.
She’s gearing up to slash tax relief on pension contributions and slap inheritance tax on any pension pot that’s left when people die.
Now an influential left-wing tank is urging her tackle one perk I never believed the party would touch in its wildest dreams. The tax-free pension lump sum.
This is the one of the most popular and best understood pension perks of all. But for how much longer?
Tens of millions who have saved into a company or personal pension are free to take 25% of their pot entirely free off income tax, from age 55.
People typically earmark the money to clear their mortgage and other debts, treat themselves to the holiday of a lifetime, or help younger family members get on in life.
They’ll have to think again if Starmer and Reeves listen to the Fabian Society, a leading left-wing think tank.
It has just called on Labour to slash the tax-free lump sum as part of a wider tax raid on pensioner wealth. Millions will be furious if Labour listens.
Many people don’t realise there’s already a lifetime cap on how much tax-free cash you can take. It’s set at £268,275, so most don’t hit it.
That’s far to high for the Fabian Society, which wants it slashed to £100,000.
Anybody with more than £400,000 in their pension will be affected. That may sound a lot but it isn’t in practice.
If a couple spent £400k on a joint life index-linked annuity at age 65, they’d get income of £18,296 a year. Which is hardly riches in my book.
It gets worse.
Once that £100,000 cap is introduced, it won’t rise for years. If ever. Every year, more pensioners will fall over the threshold, and lose their tax-free cash.
It’s the process called fiscal drag, and the Treasury loves it.
Those lovely Fabians want to raise £10billion in total from the nation’s pension savings, which begs a broader question. Why is it always pensioners?
Starmer and Reeves have repeatedly made it clear they won’t increase taxes on “working people”. Pensioners seem fair game, though.
Is this their punishment for choosing to vote Tory?
It’s beginning to look like it.
If the cap came in, pension withdrawals above £100,000 would be taxed at up to 45%.
Also, there is the principle of it. People have been saving in a pension for decades on the assumption that they can take 25% of it free of tax.
Snatching that away at the last minute would be a total betrayal. It’s a retrospective tax.
Labour could get round this by only introducing the cap for new savings. But that would be even worse.
First, it would add another layer of complexity. Second, it would be unfair on younger savers. Especially if Reeves cuts tax relief on their pension contributions too.
That may be the one thing that stops Labour from heeding this Fabian madness. By waging war on pensioners today, they’ll also punish working people tomorrow.
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