Taxation for the pension rich
The Telegraph have unearthed some research that suggests that the average extra tax paid by the pension super-rich is £46,332.
HMRC’s figures show that the total amount of tax paid by people whose pension savings rise above the lifetime limit has jumped by 33pc in 12 months to £120m.
While comparatively small numbers of investors are paying this penal tax so far, their numbers are growing. The average tax bill for those affected is an astonishing £46,332.
Gradual cuts to the amount you can save into a pension over your lifetime, now £1m and down from £1.8m at its peak, have come at the same time as stock markets surged. In the 2016-17 tax year alone, 2,590 people had to pay tax because their savings broke through the £1m limit.
These numbers are so tiny as to make me think that more money has gone to financial advisers to pay for AA/LTA anti-avoidance than has come back to us tax-payers. These taxes are financial speed-bumps, but not much more.
The alternative to these speed-bumps are the road-closures that could result from the radical tax-reform considered by George Osborne but rejected to keep us in Europe (ho ho ho). These reforms ranged from the straightforward restriction of tax-relief to basic rate tax to the full monty of a shift to TEE. I have written at length about the economics behind the more radical steps. They remain extremely attractive to those struggling to keep Britain on the path towards fiscal rectitude.
Steve Webb has been in the papers, suggesting that Phil Hammond might decide to return to the radical course. I suspect that this is no more than the usual “scare the shit out of policyholders to get the funds in before budget day” scam. But perhaps the year we spent consulting on how a more fair pension taxation system could be created, had some positive effect, at least in getting in new premiums.
Higher rate tax-payers are so cossetted by the UK tax-system that they should be very cross with the Telegraph for reminding politicians just how much they are getting away with. Our redistributive tax system sits ill with the regressive taxation of pensions that gives to the have and gives nothing to the have-nots.
If we are to feel sorry for the pension super-rich with their £46k AA/LTA bills, how much more sorry should we feel for those who have no pension savings and miss out on the meagre incentives that they should by law be getting.
The Telegraph should pay more attention to the NET-PAY scandal and keep its lips shut about the feather-bedding of its well-heeled readers.