Hunt warned against £10bn pensions tax raid
Chancellor Jeremy Hunt has been told he risks alienating core Tory voters if he goes ahead with a £10 billion tax raid on pensions savings by higher earners.
Basic rate taxpayers get 20% tax relief on their pension contributions, while higher-rate taxpayers can currently claim 40% and additional rate taxpayers 45%.
But, according to a weekend report, the 40% and 45% rates could be brought in line with the basic rate.
The proposed move is said to form part of plans to plug an estimated £50billion blackhole in the public finances.
Mr Hunt and Mr Sunak are said to be looking towards those ‘with the broadest shoulders’ to bear the brunt of the fiscal tightening as they put the finishing touches to the Autumn Statement on 17 November.
A report by the Pensions and Lifetime Savings Association found a flat rate of 20% would raise between £8bn and £10bn a year.
But former pensions minister Sir Steve Webb has warned that it could come at a cost at the ballot box.
“£10 billion means five million, mainly Tory, voters losing £2,000 per year each,” he told The Sunday Telegraph.
“If you wanted to alienate your core vote by taking away the higher rate of tax relief then you have done the job.”
A Treasury source told the newspaper the move ‘has been discussed’ in ongoing talks over the Autumn Statement, but no ‘white smoke’ had yet emerged.
Sir Steve, the ex-Liberal Democrat MP who was pensions minister until 2015 and is now a partner at the firm Lane Clark & Peacock, said: ‘£10 billion means five million, mainly Tory, voters losing £2,000 per year each.