Friday, 14 Jun 2024

Angela Rayner’s pension tax cut sums ridiculed by experts

Jeremy Hunt defends pensions tax break

Labour’s claim that the average worker would have to work for 400 years to benefit from a Tory pensions tax cut has been ridiculed by leading experts. Chancellor Jeremy Hunt used his spring Budget to abolish the tax-free lifetime allowance, which had stood at £1.07 million.

But new analysis of official data by Labour claims the average worker would have to keep working for four centuries to benefit.

Deputy Labour leader Angela Rayner said someone starting their career now would have to work until 2423 “before they’d see a penny”.

However the sums by the opposition party have been rubbished by pensions experts.

Jon Greer, of wealth management company Quilter, told the Telegraph: “Labour’s calculations to reach this figure are rudimentary at best and crucially overlook the power of compound interest. This is not how saving works.”

Quilter said a worker with a £107,000 nest egg, earning £35,000 and still contributing to their pension would take around a tenth of Labour’s estimate to hit the cap.

Tom McPhail, of financial services consultancy LangCat, said the calculations showed Labour was on the “backfoot” on pensions policy.

He added:“They have not done any intellectual heavy lifting on pension policy in some time.”

The analysis of Office for National Statistics (ONS) data by Labour claimed the average 55 to 64-year-old approaching retirement age has £107,300 in their pension pot – just a tenth of the amount needed to take advantage of the change.

It said they would have to keep working and adding to their pension for 10 times longer – amounting to about four centuries – to see a tax saving.

Ms Rayner said: “Someone starting out their career today would have to work until the year 2423 before they’d see a penny from the Tories’ tax giveaway to the top one percent.

“At a time when families across the country face rising bills, higher taxes and frozen wages, this is the wrong priority at the wrong time.

“This May voters face a choice, a choice between a Tory government that has left people out of pocket during a cost of living crisis and prioritised giving a £1 billion bung to the richest one percent, or a Labour government that would put working people first.

“That is what Labour will always do. Right now, a Labour government would freeze council tax this year, funded by a proper windfall tax on oil and gas giants to help ease the cost of living crisis facing so many.”

The Government has insisted the tax cut, which will cost £2.75 billion over the next five years, will encourage senior doctors, teachers and police officers to stay in work because current rules mean it is not worth them carrying on.

The Office for Budget Responsibility has estimated it could boost the workforce by 15,000 as people who might otherwise have retired to avoid breaching the lifetime allowance decide to keep working instead.

Labour has pledged to reverse the policy if it wins the next general election and instead create a targeted scheme for doctors.

Source: Read Full Article

Related Posts