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Osborne losing revenue

Pensions tax-free lump sum under threat

pension pot 2Chancellor George Osborne may be planning to scrap the tax-free cash element from last year’s pensions freedoms.

Former pensions minister Steve Webb has added to recent speculation that Mr Osborne will move pensions into an ISA-style tax process.

He may also scrap the right for over-55s to claim a 25% tax-free lump sum.

Mr Webb, now director of policy at Royal London, said the Treasury is losing up to £$4 billion in revenue from the current system which means that a quarter of a pension never gets taxed.

An ISA is already tax-free. All of the money that goes in to a pensions Isa has already been taxed, so there is no equivalent of the tax-free lump sum.

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