A Tax raid on wealthy people’s pensions will hit middle class professionals including doctors, headteachers and senior civil servants, experts warned today.
George Osborne is widely expected to squeeze the amount that can be pumped into funds tax-free each year from £50,000 to £40,000, or even £30,000, in Wednesday’s Autumn Statement. The Chancellor is targeting the very wealthy and people on welfare benefits in his search for £10 billion of extra savings to keep deficit-reduction on track.
Although aimed at earners on £200,000 a year in the private sector, the pension raid would hit people in the public sector lower down the income scale, according to John Ralfe, an independent pension consultant, who said “gold-plated” public sector pensions are treated differently. Someone in a defined contribution scheme — typical in the private sector — would have to be earning about £200,000 or more to be affected. For defined benefit schemes, now rare in the private sector, people earning £120,000 would be hit.
In the public sector, where the Inland Revenue uses different rules, the cap would affect people on £80,000, including 70,000 NHS consultants and 5,000 to 6,000 headteachers.
Mr Osborne’s options have been narrowed by Nick Clegg making clear that Liberal Democrats will oppose new welfare cuts unless the pain is seen to be spread fairly. The Chancellor said at the weekend that austerity might go on until 2018 — three years longer than he first promised — because of the slow European recovery.
