Patrick O'Donnell
Guest Reporter
Chancellor Rachel Reeves is set to unveil the Autumn Budget this Wednesday, Labour's first since 2010.
However, the Government is being urged to "tread carefully" in the likely implementation of any stealth tax raid on pensions.
Speculation is rife about potential changes to pension taxation as part of Reeves' plan to generate £20billion for public services.
Two key areas of focus have emerged: alterations to the tax-free lump sum cap and the introduction of a single rate of pension tax relief.
These rumoured policies have sparked concern among savers, with experts warning of significant implications for different income brackets.
As the Chancellor prepares to announce her fiscal strategy, analysts believe the pension system could be on the brink of a substantial overhaul.
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Currently, individuals aged 55 and over can take a quarter of their pension savings as a tax-free lump sum, up to a maximum of £268,275. However, reports suggest the Chancellor may lower this cap.
This change could result in people paying more income tax when accessing their pensions.
Another potential reform is the introduction of a single rate of pension tax relief. At present, pension tax refunds match one's income tax bracket, with basic rate taxpayers receiving 20 per cent relief.
Higher earners benefit from more generous relief at 40 per cent or 45 per cent. The rumoured plan proposes a flat rate of 25 per cent for all.
The lowering of the tax-free lump sum cap could also impact those with larger pension pots. They may face increased income tax when accessing their savings.
These potential reforms have sparked concern among savers, with many worried about the long-term impact on their retirement plans.
Experts warn that while these changes might boost tax revenues, they could discourage pension saving, particularly among higher earners.
Lily Megson, the policy director at My Pension Expert, has urged the government to "tread carefully" with the upcoming Budget.
LATEST DEVELOPMENTS:
She emphasised the importance of pensions as "one of people's most important assets".
Megson warned against "aggressive fiscal policies" to boost tax revenues, citing growing anxiety among savers. She highlighted the "culture of fear" bred by years of financial instability and policy changes.
"Raiding our already-eroded savings and pension pots to claw back tax revenue is not the answer," Megson stated. She stressed the need to balance fiscal responsibility with savers' security and confidence.
The expert called for mindful and restrained policy shifts, suggesting the Budget presents "a rare opportunity to begin restoring public confidence". Megson concluded by urging the government to strengthen, rather than weaken, "the public's faith in their financial future".
Find Out More...
However, the Government is being urged to "tread carefully" in the likely implementation of any stealth tax raid on pensions.
Speculation is rife about potential changes to pension taxation as part of Reeves' plan to generate £20billion for public services.
Two key areas of focus have emerged: alterations to the tax-free lump sum cap and the introduction of a single rate of pension tax relief.
These rumoured policies have sparked concern among savers, with experts warning of significant implications for different income brackets.
As the Chancellor prepares to announce her fiscal strategy, analysts believe the pension system could be on the brink of a substantial overhaul.
Do you have a money story you’d like to share? Get in touch by emailing [email protected].
Currently, individuals aged 55 and over can take a quarter of their pension savings as a tax-free lump sum, up to a maximum of £268,275. However, reports suggest the Chancellor may lower this cap.
This change could result in people paying more income tax when accessing their pensions.
Another potential reform is the introduction of a single rate of pension tax relief. At present, pension tax refunds match one's income tax bracket, with basic rate taxpayers receiving 20 per cent relief.
Higher earners benefit from more generous relief at 40 per cent or 45 per cent. The rumoured plan proposes a flat rate of 25 per cent for all.
The lowering of the tax-free lump sum cap could also impact those with larger pension pots. They may face increased income tax when accessing their savings.
These potential reforms have sparked concern among savers, with many worried about the long-term impact on their retirement plans.
Experts warn that while these changes might boost tax revenues, they could discourage pension saving, particularly among higher earners.
Lily Megson, the policy director at My Pension Expert, has urged the government to "tread carefully" with the upcoming Budget.
LATEST DEVELOPMENTS:
- Savers urged to 'be aware' as stealth tax raid could target millions in Budget
- National Insurance raid could make workers £3,000 worse-off
- Britons face 'death tax on pensions' as part of inheritance tax raid
She emphasised the importance of pensions as "one of people's most important assets".
Megson warned against "aggressive fiscal policies" to boost tax revenues, citing growing anxiety among savers. She highlighted the "culture of fear" bred by years of financial instability and policy changes.
"Raiding our already-eroded savings and pension pots to claw back tax revenue is not the answer," Megson stated. She stressed the need to balance fiscal responsibility with savers' security and confidence.
The expert called for mindful and restrained policy shifts, suggesting the Budget presents "a rare opportunity to begin restoring public confidence". Megson concluded by urging the government to strengthen, rather than weaken, "the public's faith in their financial future".
Find Out More...