Contrary to the widespread belief that only City fat cats on massive bonuses need worry, savers being targeted by the taxman range from members of public sector pension schemes…
Is it the public sector schemes, at least the top end of them, which will be hit hardest?
I\’ll probably garble this but, so, we\’ve got one major change which will hit them.
So there\’s this maximum pension limit, the maximum value of a pension you can have while still getting tax relief. £1.5, 1.8 million, something like that.
When you\’re making contributions to a fund this is easy enough to value. But what about those public sector pensions which aren\’t so funded, which are final salary ones?
It\’s been assumed so far that you take the annual pension and multiply it by 10 to give what the value of the fund is. This is to now go up to 16, maybe even 20.
Seems fair enough really, given that life expectancy at pension age is between 15 and 20 years.
So, fat cat civil servant, on £100k a year pension (not that there are all that many of those but….), under the old rules was estimated to have a fund of £1 million. Under the new, £2 million and he gets to pay tax on that pension….when it\’s earned, not just when it\’s paid out to him.
Have I got that right?
And if I have, is that really what this is all about? Taxing back some part of those overly generous pensions granted to parts of the public services without actually breaching the contracts under which such pensions have been granted?