At first sight, Jeremy Hunt‘s pension tax guarantee may seem like yet another attempt at the ‘grey vote’. It’s much more than that.
The Chancellor promises that, if re-elected, the Conservatives would not increase existing taxes on pensions or introduce new ones over the next five years.
This reassurance is intended to give employees confidence that if they save wisely for their retirement, the greedy taxman will not plunder those savings.
And it is just as important for people in their 20s as it is for people who are approaching or have passed retirement age – perhaps even more so.
A pension fund is built up throughout your working life. Those who have built up a nest egg have paid their dues for decades.
The Chancellor, Jeremy Hunt (pictured), has promised that the Conservatives, if re-elected, will not increase existing taxes on pensions or introduce new ones over the next five years.
Shadow Chancellor Rachel Reeves (pictured) has said Labor will not increase income tax, national insurance or VAT
Younger generations must be encouraged to do the same, otherwise many will be forced to fall back on the state at retirement age, with huge consequences for the country.
Shadow Chancellor Rachel Reeves has said Labor will not increase income tax, national insurance or VAT. However, unlike Mr Hunt, she has made no such commitments on private pensions.
If history is any guide, that should make savers very scared. In 1997, one of New Labor’s first acts was to abolish the tax credit on dividends received by pension funds on investments.
This raid, which is not mentioned in the manifesto, is sucking £5.6 billion a year out of the system, leading to the demise of salary-based pensions in the private sector.
Previously, almost all major companies had offered this. Today they are almost extinct, except in the public sector, where defined benefit schemes – supported at enormous cost by the state – are still the norm.
So will Ms Reeves refocus on private pensions? We already know that she plans to reintroduce the lifetime limit on the tax-free amount savers can put into their fund.
But there are other drastic measures that she does not rule out. Would she reduce the tax relief on employees’ pension contributions? Lower the cap on how much can be put into a fund each year? Increase taxes on the share transactions on which pension funds depend? Lower the lifetime limit further? Have pensioners pay for national insurance? Reduce the tax-free entitlement to pension pots from the current 25 percent?
These are questions that Labor has a moral obligation to answer before July 4, to prove they are not plotting a Gordon Brown-style ambush. The party’s silence is ominous.
They would obviously try to anchor any new raid in terms of intergenerational fairness. But the young will eventually grow old themselves. Destroying the pension system for short-term gain would be as much a betrayal of their future as anyone else’s.
A lesson in cruelty
When Labor decided to impose VAT on independent schools, they undoubtedly saw it as a blow to the great bastions of wealth and privilege. As we report today, the reality is very different.
Downham Preparatory School, in Norfolk, caters for pupils with complex needs ranging from autism to emotional problems, which leave them unable to cope in large classes.
Downham prep school (pictured) has said they have been forced to close due to Labour’s plans to impose VAT on schools
According to the director, their parents are working people “like plumbers and electricians” who make sacrifices for the sake of their children’s well-being.
For the school to be forced to close because of this tax increase shows how cruel and hateful this is.
As many thousands of other private students end up in the state sector, this could also end up costing the country a lot of money.
