Starmer and Reeves are mimicking a controversial move by former Labour chancellor Gordon Brown. He launched an immediate stealth tax raid on the nation’s final salary workplace pensions, directly after winning the 1997 general election.
Brown didn’t reveal his plans during the campaign, just like Starmer and Reeves didn’t tell us theirs.
The moment Brown was in power, he scrapped a hugely valuable tax credit that destroyed millions of final salary pension schemes. But only those in the private sector.
Brown didn’t dare touch gold-plated public sector pensions.
Today, a mere 7% of private sector workers get defined benefit pensions, which pay a guaranteed lifetime income based on final salary and years worked.
By contrast, 80% of public sector workers still get them.
Today, Starmer and Reeves are considering a string of new taxes on pensions. Like Brown, every one is aimed squarely at the private sector.
None of them will harm their mates in the public sector.
If they did, Labour would make a quick reverse ferret, as we discovered this morning.
On October 30, Reeves seems likely to slap inheritance tax on unspent private pension savings at death.
She may also attack the hugely popular pension benefit that allows savers to take 25% of their pension free of tax, sparking panic among those who may be affected.
There’s also talk that Reeves will slash the £60,000 annual allowance, the maximum anybody can pay into a pension each year, to £40,000 or less.
All of these changes are still in play, but we’ve just learned that Reeves has the biggest pensions tax raid of all. Why? Because it won’t just hit the private sector, but the public sector, too.
And Labour can’t allow that.
Today, people get tax relief at either 20%, 40% or 45% when contributing to a pension, depending on their tax bracket.
Reeves was planning to cut this to a flat rate of just 25% or 30% for all. Basic rate taxpayers would get more tax relief, while higher earners got less.
So what stopped it?
Higher earners in the private sector won’t be the only ones to lose out. The change would also hit public sector workers like doctors, teachers and nurses.
Immediately, a good idea became a bad one, in Labour’s eyes.
The unions would have gone berserk. Doctors’ union the BMA was warning of yet more strike action.
So of course Labour crumbled.
It’s happy to soak billions out of private sector pension savers, but won’t touch the public sector.
The private sector contains valuable workers that the country needs and it’s right they get decent pensions.
And most of them they already do. Civil servants, teachers and NHS workers have pensions more than £25,000 a year, according to the Taxpayers’ Alliance.
The average private sector pension is worth just £7,000.
So guess whose pensions Labour is targeting? The private sector.
Yet Reeves is happy to grab more of their money. Unless it hurts the public sector, too.
