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Labour plans £1bn pension raid to fund 'job guarantee' scheme
Shadow chancellor Ed Balls wants to cut pension tax relief for top earners to fund a job scheme for the long-term unemployed.
The Labour party plans to scrap higher rate pensions tax relief for the top earners in a bid to raise £1 billion for a mandatory job scheme for the long-term unemployed.
Shadow chancellor Ed Balls (pictured) will announce the plans for the cut later today, according to the Financial Times.
The plans would see pensions tax relief for those earning more than £150,000 – who pay 45% income tax and receive the same in pension relief – reduced to 20% on contributions made, although the 40% tax relief will remain for those paying 40% income tax.
The £1 billion saving would pay for a ‘jobs guarantee’ for adults who have been unemployed for more than two years. The unemployed person would be guaranteed a job for six months, with the government paying the minimum wage and national insurance cost for the role.
Balls has previously championed a £2 billion tax on bank bonuses to pay for a youth job scheme.
Pressure has been mounting to cut the higher rate of pension tax relief, which costs the government £7 billion a year. It is argued that the wealthy benefit most from the tax relief but most higher rate taxpayers become basic rate taxpayers, or non-taxpayers, in retirement, meaning they do not ‘pay back’ the relief they receive on contributions.
In his Autumn Statement the chancellor George Osborne ignored these calls, instead reducing the annual limit that individuals can save into a pension from £50,000 to £40,000. He also cut the lifetime pensions allowance from £1.5 million to £1.25 million from next year.
Pension experts are tired of what they see as perpetual tinkering by politicians in retirement savings.
George Bull, senior tax partner at Baker Tilly, the accountants, said: 'Of course, every reasonable person would like to see as many people as possible benefiting from regular work. But why is it that politicians seem incapable of leaving pensions alone? Every year (twice in some years) new pension tax changes create further uncertainty and difficulty for those doing their best to plan for their retirement.'
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