Financial Times
Bloomberg
The FT , when they publish a manifesto leak are seldom wrong. When Bloomberg publish the same headline , we can be sure that the Labour party policy team has spoken.
So speculation -that Rachel Reeves has abandoned her pledge to restore the Lifetime Allowance is almost certainly correct, putting to bed months of speculation.
We can conclude that Labour concluded that this would be “the wrong priority, at the wrong time, for the wrong people”. This handy phrase can in future be trotted out for any tactical u-turn, it is of course the phrase used the day after the 2023 spring budget about Jeremy Hunt’s scrapping of the LTA.
The FT suppose that with a 20% lead, you don’t need to be risking your popularity on a point of principle. The NHS is too sensitive a bear to poke right now and it is the NHS doctors who are making the noise on LTA.
The Labour manifesto hasn’t pleased everyone
But to most of us (but not for me) , the scrapping of the reintroduction of the LTA will be meaningless. In 2021-22 some 11,000 people paid an average charge of £40,000 each on pension savings that exceeded the cap. The Office for Budget Responsibility scored the abolition of the cap as an £800mn-a-year tax cut.
Since I’ve prioritised pension savings over everything but wooden boats I would have had an LTA “problem” which would have amounted to me drawing a few thousand pounds of my annual income with a 55% tax charge. Tant pis!
Apart from 10,999 others, who I think can equally afford 55% tax, the LTA was a non-issue. We are told that Rachel Reeves had not baked the supposed £800m saving into her overall budget so the announcement is a non-event. But it will dominate the discussions in the trade papers nonetheless. There will be hard luck stories from financial advisers who circumvented forestalling measures by crystallising pension pots and recriminations from tax advisers who had organised their highest net wealth clients to plan their residency and domicility to accommodate a pensions wealth tax.
I remain convinced this is not the end of the story. There is a much bigger fish in the pool, that fish has “inheritance tax” pinned to its scales and is waiting to be netted.
Nor should this be the end of the matter when it comes to Labour’s pension policy. Martin Woolf , also in the FT writes this morning that a new Government should
..encourage a substantial rise in pension savings, which are currently far too low. This is particularly true for the self-employed. But even employees in today’s defined contribution pension schemes are saving far too little.
Thus, there is a minimum mandatory contribution level of 8 per cent, of which at least 3 per cent must come from the employer. This is too little to deliver a decent pension. In a country with a very low national savings rate, the case for raising the mandated level is even stronger. This could be put into effect with automatic annual rises of, say, a percentage point over a period of years.
My supposition is that it would be easier to implement radical ideas if they were in a manifesto. We shall soon see whether there is any appetite for this.
But assume that, as the polls suggest, Labour achieves a huge majority. Assume, too, that the Conservatives will be promptly swallowed up in a battle over just how reactionary to become.
That might present a notable, possibly even unique, opportunity for reform. The election campaign may well remain the depressing event it is. But the country cannot afford an equally depressing government afterwards.
I will leave you with my campaign slogan
We need more money in pensions and more pensions for our money.