Treasury planning ‘pensions raid’ to pay for pandemic costs
The Treasury is looking at pensions taxation as one way to pay for the cost of the pandemic, although there are no plans to make changes to the triple lock.
The Treasury is looking at three ways to change the ways in which pension contributions are taxed, the Telegraph first reported.
Government is reportedly looking at cutting the lifetime allowance from £1,073,100 to £800,000 or £900,000, lowering the point above which tax charges kick in.
Another change would see people contributing to pensions getting the same rate of tax relief, which would hit higher-rate taxpayers, while another is changing the taxation on employer contributions.
“Our job is to keep people out of poverty, not to enrich the middle classes” a senior government official told the Telegraph.
A Treasury official played down the likelihood of an overhaul, stressing the chancellor is opposed to raising taxes on families.
The “triple lock”, which uprates the state pension by the highest of average earnings, inflation of 2.5 per cent, is reportedly here to stay.
The Treasury is reportedly concerned about the cost of the triple lock, as earnings have risen by around six per cent throughout the Covid crisis as lower-paid jobs were lost, making the rise to the state pension costly.
Any further tax hikes will likely attract a lot of pushback from Tory backbenchers and grassroots members.
One northern Tory MP told the Telegraph: “People need to wake up to the fact that we’ve been massively spending and that we need to balance the books.
“I’d sooner growth fulfilled that, but tax and public expenditure will no doubt have to play a role.
“The problem is the tax burden is too high, so that must be a last resort.”
It comes as tensions are reportedly rising between Boris Johnson and Sunak over spending promises made by the Prime Minister.
Two recent major spending announcements – of a new Royal Yacht and a new G7 green infrastructure programme for developing countries – were reportedly announced by Johnson without even consulting Sunak or the Treasury.