Beware false prophets!

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Before breathing a sigh of relief, the pension industry should remember the diversionary tactics put in place by the Treasury prior to the introduction of Pension Freedoms , the budget before last.

Tax relief- as it impacts you and me- is all amount we get in our pay packet (and if we are higher rate tax-payers- self assessment).

But there are other ways to raid our pensions than through our pay-packet. Gordon Brown taxed pensions by restricting the tax-exempt status of dividends and the Government can collect tax owed to it by getting schemes to reduce pension benefits at retirement (a system known as scheme pays).

If anyone thinks that a statement from the Treasury telling us what the Chancellor is going to do in the budget, is being naive. That’s not the way things work.


 

I read the statement issued to the Press on Friday as a potential smokescreen for whatever Osborne is really up to. If you think that personal tax-relief is what this is all about, you should look at this table.

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The big ticket items that the Chancellor can have a go at, cannot be collected via PAYE. Employer contributions to Defined Benefit Schemes, can only be valued by pension experts , a PAYE approach doesn’t work.

The CBI rightly point out that any system of tax-relief collection using the employer, will place a further strain on payroll. But collecting tax from pension funds puts no strain on payroll – though it would reduce pensions.

I have a sneaking feeling that Osborne knows exactly how to get his pound of flesh and it won’t be through our pay-packet (or end of year tax-bill).

Don’t get fooled again, I reckon this Chancellor is making a monkey of us all.

About henry tapper

Founder of the Pension PlayPen, Director of First Actuarial, partner of Stella, father of Olly . I am the Pension Plowman
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2 Responses to Beware false prophets!

  1. Phil Castle says:

    Yep

  2. Ian Neale says:

    Those were my thoughts exactly, last weekend. I imagined one of them saying ‘look, we’ve got to stop laughing at them and their anxious rumours and get some ideas down; can one of you brief a few credulous journos that we want to help pension savers so we’re not going to make any changes (snort!)?

    Table PEN6 was updated for tax year 2014/15 on 26 Feb, by the way; not much difference: employer contributions still attracted 48% of all tax relief ( a big chunk of that for DB deficit repair), and investment income a further 22.5%.

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