Pensions experts have criticised Labour’s plan to cut tax relief on pensions for people earning £150,000 to fund guaranteed jobs for the long term unemployed, saying it will struggle to raise anything like the £1bn claimed.
They also warn that many top earners will stop saving through pensions to avoid “double taxation”. The plan would see the tax reaped from cutting tax relief on pensions for top earners from 45 per cent to 20 per cent. Ed Balls, Shadow Chancellor, said he hoped to raise £1bn like this to pay for jobs for people out of work for 24 months or more.
But John Ralfe, the independent pension consultant who fixed the Boots pension scheme, said the plan would raise “nothing like the £1bn which has been claimed.
“This change would increase the effective tax on pension savings for higher earners to well over 45 per cent, so they would simply stop saving in a pension. By saving outside a pension they would continue to pay 45 per cent top rate.”