If media reports are to be believed, taxes on pension contributions could increase this autumn as the Treasury seeks to raise money to pay for the surge in public spending during the pandemic. Downing Street has, however, repeatedly dismissed the possibility of scrapping the “triple lock” system, which could see pensions rise by up to six per cent next year. A report by The Daily Telegraph suggests Treasury officials are contemplating plans to change the way pension contributions are taxed.
One proposal is to slash the pensions lifetime allowance from £1,073,100 to around £800,000. Pension savings above the allowance are taxed at 55 per cent if taken out as a lump sum or 25 per cent if paid in any other way. Another plan involves reducing the level of pension tax relief available to higher-rate taxpayers from 40 per cent to 20 per cent. Yet another proposal involves new taxes on employer pension contributions.
The pension tax reform could be included in Chancellor Rishi Sunak's next autumn statement due in November, according to “well-placed source”. Meanwhile, Sunak and other senior ministers are reportedly looking to push Prime Minister Boris Johnson to change his style of leadership. Reports suggest the cabinet wants the Prime Minister to involve them in key decisions rather than seeking out a close group.
