UK Labour party have announced plans to cut pension tax relief for those who earn £150k (€209k) and over, amounting to savings which can be used to fund a reduction in University fees down to £6,000 (€8,300) from the current (€12,500) which would be of huge benefit for future UK graduates.
The plan could have significant implications for higher earners and could mean that those with salaries from £150,000 to £180,000 a year could lose tax support on what has been invested into their pensions.
Tom McPhail who is head of pension’s research at Hargreaves Lansdown’s states that the measures aren’t aimed at disadvantaging the wealthy; and the new terms are more likely to penalise middle-income employees who want to give to their retirement and not be a burden to the state.
“Politicians have come to see the UK population’s retirement savings as a convenient trust fund which can be taken as aid for pre-election promises. It is also concerning that with the effects of auto-enrolment and the new pension freedoms being unknown still, introducing further changes increases the risk of unintended consequences,” Mr McPhail went on to say.
Restricting the Lifetime Allowance to £1m (€1.4m) would also mean that final salary scheme members would still be able to build up a secure pension each year. Every time the Lifetime Allowance is reduced there are more middle to high earners in final salary schemes wanting to opt out. It is also worth noting that by reducing the Annual Allowance to £30,000, having any kind of Lifetime Allowance is unnecessary; both restrictions are not needed.