Saving for retirement takes decades yet politicians of every stripe constantly change the goalposts, making it even harder than it already is. Too often they treat our pensions like cash cows, milking them whenever they need spending money.
New Labour chancellor Gordon Brown was the master of that, but a string of Tory chancellors have followed his lead.
Together, they have savaged the UK’s company and personal pensions, once the envy of the world.
Savers are bracing themselves for yet another tax raid if Keir Starmer and shadow chancellor Rachel Reeves win power on July 4.
The problem is, we have no idea what they will do. I’m not convinced the Labour Party does, either.
Prime Minister Rishi Sunak decision to call a snap election caught every party on the hop. They haven’t published their manifestos yet.
So far all we’ve had one or two voter-friendly pledges, such as Sunak’s triple-lock-plus state pension brainwave.
We may not get much more clarity before we go to the polls, warns Gary Smith, partner in financial planning at wealth management firm Evelyn Partners.
“We haven’t seen the manifestos yet, and even when we do they might not contain much concrete detail on pensions, inheritance tax or the taxation of investments.”
Smith said there’s now huge suspicion around its plans.
The Institute for Fiscal Studies and the International Monetary Fund have warned the next government faces a whopping £30billion funding gap that must be filled, probably by hiking taxes.
Labour has pledged not to increase the four most lucrative taxes: income tax, National Insurance, VAT and corporation tax.
That leaves pensions and inheritance tax as the most likely targets, Smith said.
I’m worried by Labour’s kneejerk decision to revive the pensions lifetime allowance.
This slaps a brutal 55 percent tax charge on anybody who is deemed to have built up too much pension. It’s insanely complex and impossible to plan around. Unless your name is Keir Starmer, who has craftily made sure he will never pay it.
While the vast majority of pension savers won’t breach the pensions lifetime allowance, the fact that Labour would reinstate such a confusing tax is worrying.
And it probably won’t stop there.
There are rumours that Labour could scrap the 25 percent tax-free pension lump sum.
Will they do it? We don’t know. Although I suspect this would be a step too far, even for Reeves and Starmer.
My guess is that they will introduce inheritance tax on pensions, though. As I’ve previously revealed, Labour Party’s newly appointed advisors have called for this.
Jeremy Hunt recently increased the annual allowance for pension contributions from £40,000 to £60,000.
Labour condemned this as a tax break for the wealthy, and I think it could reverse that, too. It might even cut the annual allowance to £20,000 or £30,000, but that’s a guess.
Either measure would save the Treasury a small fortune in pensions tax relief.
The thing is, we don’t know. We may have to wait until Reeves delivers her autumn statement in November.
Pension savers are paralysed, wondering what to do. NHS doctors are taking no chances, and quitting the NHS to avoid the lifetime allowance.
Smith said pension savers should avoid basing crucial retirement decisions on speculation. We don’t which taxes Labour will hike, while any changes may not come into force before April 2025.
Given the uncertainty, may will panic and jump the gun. With the election a month away, Labour needs to come clean on its plans. Or does it have something to hide?
