Posts Tagged ‘pension reform’

Revealed: George Osborne’s secret £6.5bn tax raid on pensioners

20/03/2015, 11:17:26 AM

by Samuel Dale

Buried deep in this year’s dull Budget was a secret £6.5bn tax raid on pensioners and savers under the guise of radical reforms.

George Osborne’s most significant policy announcement was the proposal to allow pensioners already drawing an annuity to sell their policy in exchange for a lump sum.

It is the second stage in major pensions reform announced in last year’s Budget to allow all over-55s to access their pension pots.

The first stage of pension freedoms is relatively simple. The pension system saw savers build up a retirement pot of cash with generous tax relief on contributions. In exchange they had to buy a secure income or annuity (or face a punitive 55% tax if they withdrew their cash from the pension wrapper).

Annuities work as a reverse insurance product so you pay over a big chuck of cash to the insurer and in return they pay you money every month until you die. Insurers pool the risk so those who die earlier fund the payments for those who live longer than expected lives.

As people live longer insurers are paying a lower amount each month over a longer period, making pensioners buying them poorer. Successive Governments have taken steps to ease the requirement to buy an annuity by allowing wealthier investors to drawdown their own money.

But Osborne’s announcement last year, coming into force on 6 April, is the big bang. It means anyone can withdraw their pension pot at marginal income tax rates (although everyone receives an initial tax-free lump sum of 25%).

The Treasury estimates the behavioural changes will see individuals wanting the money today despite the tax penalties. It will lead to many savers paying income tax on withdrawals they have never paid before.

So how much does it cost?


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Monday News Review

20/06/2011, 06:25:26 AM

Hutton urges Labour to back his pension reforms

The former Labour business secretary charged by the coalition with overseeing its contentious pensions reforms has called on his party leader to back his plans and ask union leaders to stop threatening strikes. Lord Hutton said people had to face the “reality” that public sector pension reform was necessary and that strikes would not “make this problem go away”. When asked if Ed Miliband should oppose the threat of industrial action by the unions that backed him to become party leader, Hutton said “of course”. He also said he would like to see Miliband endorse his report. The government and unions have been at loggerheads since the end of last week when ministers went public with plans to extend the retirement age and increase pension contributions for millions of public sector workers. Union leaders felt that ministers had pre-empted negotiations with the announcement. The head of Unison, Dave Prentis, and other union leaders threatened the biggest wave of industrial action since the general strike of 1926 after the chief secretary to the Treasury, Danny Alexander, made the announcement on Friday. The Treasury later said that Alexander was articulating proposals for reform, not settled government policy, but Prentis said that Alexander’s speech had effectively rendered the talks meaningless. – the Guardian

Lord Hutton, the Labour peer who drew up proposals for slashing the cost of state-sector pensions for the Government, yesterday pressed the Labour leader to use his influence to call off the disastrous strike. His intervention came after increasing criticism of the Labour leadership for failing to condemn the one-day national strike planned by teaching and civil service unions on June 30. Lord Hutton, a Cabinet colleague of Mr Miliband in the last Labour government, said: “Strikes won’t make this problem go away, we have to act now. If we don’t, it’s our kids who are going to pick up the tab and it’s not right.” Asked whether he would like to see Mr Miliband back his recommendations, Lord Hutton replied: “I’d like him to endorse the report I produced, yes, because I think it does strike the only fair balance.” Pressed on whether Mr Miliband should “call off” industrial action over pensions, he said: “Of course.” Unions yesterday intensified their rhetoric against the Government in the increasingly bitter dispute. Dave Prentis, general secretary of Unison, insisted the unions would “win” by using “smart” tactics of frequent short strikes rather than the mass confrontations of the 1980s. Mark Serwotka, general secretary of the Public and Commercial Services Union representing civil servants, said: “I think if the Government isn’t prepared to change course in the negotiations that we are having after that strike, we will see unions representing millions more move to ballot members for strikes in the autumn.” – Daily Express

Cameron’s bad dad rant rebuked

DavidCameron hit out at fathers who run out on their children yesterday and said absent dads deserve to be shamed in the same way as drink drivers. The Prime Minister described family life as the “cornerstone of our society” and said fathers had a ­financial and emotional duty to support their kids. But experts called his comments an extraordinary “contradiction” because new Government rules will actually make it harder for single parents to chase up errant fathers. Not only will they have to pay £100 simply to apply to the Child Support Agency, they then face losing between 7% to 10% of the money they receive in charges. Sadly, Mr Cameron and his ­Government are making life harder for single parents at the moment. They propose making single parents pay a fee and ongoing charges for the Child Support Agency to collect money from runaway dads. It would consist of an upfront ­application fee of £100 plus an extra ongoing charge of between 7% and 12% of the money paid. The proposals will act as a ­disincentive to using the CSA. The people who use it at the moment are the people who need it. They can’t make private arrangements, either as they don’t know where the dad lives or because he is deliberately avoiding and refusing to pay. Sometimes there is a lot of conflict and the mother doesn’t feel able to negotiate an agreement. In those situations, you need help from a statutory agency but £100 is a big chunk of money to pay just to start using the CSA. The people more likely to use the agency are those in more difficult circumstances. They tend to be poorer and to have more difficult ­relationships with the other parent. They are disadvantaged single parents. We need the CSA to be there for exactly those type of parents. The proposals make Mr Cameron’s comments yesterday all the more extraordinary. – Daily Mirror

David Cameron was accused of double standards after calling for fathers who abandon their families to be “stigmatised”, while backing policies which could make it more costly for mothers to pursue them for financial support. In an article yesterday, the Prime Minister said “runaway dads” should feel the “full force of shame” in a similar way to drink drivers. Labour said government reforms would make it easier for fathers to escape their financial responsibilities, by charging mothers to use the Child Support Agency. Earlier this year, the Government announced a consultation on proposals to encourage parents to reach their own arrangements for child maintenance – rather than relying on the state – by introducing a fee. The shadow Chancellor Ed Balls said Mr Cameron’s approach was deeply flawed.”Fathers should take their responsibilities seriously, but he is charging mums when the father leaves now to go into the CSA [Child Support Agency],” Mr Balls told the BBCs’ The Andrew Marr Show. “He is going to make it harder with his marriage tax cut [which] will disadvantage the woman left behind and give the tax break to the father who goes off.” – the Independent

Huhne attacks Coalition partners over green laws

The energy secretary, Chris Huhne, has attacked his Conservative colleagues in government as “rightwing ideologues” and “deregulation zealots” for placing environmental regulations on a list of red tape to be considered for scrapping. In comments made at the weekend to a conference of social democrats in his party, Huhne made it clear he is opposed to environmental protection laws such as the Climate Change Act, the Wildlife and Countryside Act and the National Parks Act being included in the government’s review of regulations in force in the UK. His views are thought to reflect a range of opinion within Liberal Democrats in government. A source close to Huhne said he was supported by the business secretary, Vince Cable, and Lib Dem ministers were braced to do battle over hundreds of regulations they believe their Tory colleagues will be inclined to discard. The move is part of a Lib Dem strategy to fight their corner more aggressively that has been evident in the party leadership’s successful opposition to the NHS changes. Huhne said: “Between the obsession with micro-management and target-setting displayed by the Labour party, and the fixation with deregulation and scrapping rules just because they are rules on offer from some rightwing ideologues, we Liberal Democrats have a real chance to define an evidence-based, intelligent and distinctive approach.” – the Guardian

Ed’s Maggie fixation

Ed Miliband was denounced for ‘naked and cynical positioning’ last night after his aides said he ‘admires’ Margaret Thatcher and is using her as his inspiration to become Prime Minister. The Labour leader is reportedly studying the methods she used to remove Labour from power in 1979, and based his recent pledge to crack down on welfare scroungers on similar moves by Lady Thatcher. However, his claims to be a ‘fan of Maggie’ were dismissed as a stunt by Tory MPs. And they are undermined by a new book which reveals his ‘glee’ when she was forced out of Downing Street in 1990. A new book, Ed: The Milibands And The Making Of A Labour Leader, by Left-wing journalists Mehdi Hasan and James Macintyre, reveals that the future Labour leader spent 24 hours celebrating her downfall and wrote of his ‘elation’. At the time, Mr Miliband was a 20-year-old at Corpus Christi College, Oxford, where he earned a reputation as a Left-wing firebrand student leader in his role as president of the Junior Common Room (JCR). The book describes his reaction to Mrs Thatcher’s downfall: ‘Like so many Labour students, Ed couldn’t contain his glee, referring in the JCR president’s newsletter to the “elation among many Corpus undergraduates.”’ ‘He was ecstatic,’ said a friend. ‘All of us were. We didn’t leave the college TV room for 24 hours. It was the biggest event of our lives.’ – Daily Mail

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Thursday News Review

09/06/2011, 06:46:46 AM

U-turn after U-turn

Dithering David Cameron was ridiculed yesterday after performing yet another spectacular backflip over Government policy. He ordered a rethink on controversial plans to halve jail sentences for violent criminals – shelving proposals put forward by Justice Secretary Ken Clarke. It came just two days he was forced into an embarrassing climbdown on sweeping health reforms. And it showed that, unlike one of his predecessors, Margaret Thatcher, this Tory PM definitely IS for turning. The hapless leader’s latest about-face is seen as a humiliating blow for Mr Clarke. – Daily Mirror

Justice Secretary Kenneth Clarke faced embarrassment yesterday after David Cameron vetoed his proposal to cut by up to half the prison terms for rapists and other violent offenders who make early guilty pleas. It was the Prime Minister’s second major policy U-turn in less than 24 hours following his concessions on NHS reform. Mr Clarke’s plans to cut up to 50 per cent from sentences of offenders who plead guilty early (an increase from 33 per cent) faced savage criticism from Tory right-wingers. The Independent understands that ministers are considering a two-tier scheme, under which a maximum 33 per cent discount will be retained for the most severe crimes such as rape, assault and armed robbery but 50 per cent could be introduced for less serious offences. The latter option is being backed by Mr Clarke and Liberal Democrat ministers, while many Tories are pressing for the 50 per cent proposal to be scrapped outright. – the Independent

Justice secretary Kenneth Clarke has been forced by Number 10 to abandon a plan to give rapists, and other serious offenders, a 50% sentence discount in return for early guilty pleas, but he is fiercely resisting Treasury demands to make his justice ministry bear the multi-million pound cost. Clarke had proposed to increase the discount from 33% to 50% for all offenders, so saving £130m from a departmental budget being slashed by a quarter. Following talks with David Cameron over the past 48 hours, Clarke accepted rapists will now be excluded, but he is battling to retain the extra discount for less serious offences, a policy that would free up badly needed prison places. In difficult talks yesterday with the Treasury chief secretary, Danny Alexander, Clarke pointed out he had last year won Treasury agreement that if the government’s so-called rehabilitation revolution did not deliver a lower jail population, then the Treasury would bear the costs from the reserve. – the Guardian

Another U-turn on pensions possible

Senior Liberal Democrats are understood to be determined to reverse the plans. Jenny Willott, the Lib Dem backbench spokeswoman on pensions, has also called for the proposals to be reconsidered. But the Treasury is likely to fiercely resist attempts to unpick the state pension age changes, which will save the taxpayer billions in the years ahead, unless they can be made to pay for themselves. Former Lib Dem party leader Charles Kennedy, John Hemming and Annette Brooke are among those who have opposed the changes. While Tory MPs Peter Bottomley, James Gray and Chloe Smith have asked for the rules to be amended. She told the Commons: ‘Women currently in their late 50s are getting a very bad deal. No men will see their state pension age increase by more than a year but half a million women will.’ – Daily Mail

Tory and Lib Dem rebels sided with Labour in raising concerns about the impact a decision to raise it to 66 by 2018 will have on around 300,000 women born in 1953 and 1954. They have been given just seven years notice. David Cameron was challenged over it by Lib Dem Annette Brook at PM’s Questions. She urged him to review it, saying: “The women affected will be asked to work up to two extra years over and above what they had planned for, whereas men will be asked to work only an extra year. The discrimination concerns me.” Mr Cameron said he “understood” but argued pensioners would be better off in increased pension payments agreed by the Coalition. – Daily Express

Politicians pay tribute to Prince Philip at 90

Taking time out after Prime Minister’s Questions to propose a “humble address” to be presented to the Queen to mark the occasion, Mr Cameron described the Duke as “a source of rock solid strength” during his record-breaking 59 years as consort. Ed Miliband, the leader of the Opposition, was equally effusive, saying the Duke “embodies qualities of duty, loyalty public service and good humour – great British qualities”. But it was the two leaders’ frequent references to the Duke’s famed sense of mischief that drew the biggest response from the House. Mr Cameron promised to keep his speech short, quoting the Duke’s observation that “the mind cannot absorb what the backside cannot endure”, and shared his favourite blunt comment by the Duke, when he was once asked how his flight had been. “Have you ever been on a plane?” the Duke had told a dignitary. “Well, you know how it goes up in the air and comes down again – it was like that.” – Daily Telegraph

Its up to you Carwyn

Labour leader Ed Miliband has said that policies taken forward by Carwyn Jones’ Welsh Government would shape his party’s next UK manifesto – and he gave the First Minister a free hand to negotiate coalition deals with either Plaid Cymru or the Liberal Democrats. Speaking in a London press conference yesterday, Mr Miliband made it clear he would not oppose Assembly link-ups with Plaid or the Lib Dems if the Welsh Labour leader considered these necessary. He said: “These are decisions for him. He’s an excellent First Minister. “He’s done a brilliant job since he’s taken over from Rhodri Morgan. Those kind of decisions are for him.” – Western Mail

Encouraging for Labour, but worrying figures for Ed

Ed Miliband and Nick Clegg are struggling to improve their image with voters while David Cameron remains almost twice as popular as his two rival leaders.  After a mini-revival early this year, the Liberal Democrats are back at the 11 per cent rating to which they slumped last year after their tuition fees U-turn. Labour (40 per cent) enjoys a four-point advantage over the Tories (36 per cent). Mr Cameron, dubbed “Teflon Man” by Tory aides, appears to float above the political fray. Mr Clegg seems to be the fall guy for ministers’ unpopular decisions while Mr Miliband makes little impact on voters. Mr Clegg’s personal ratings have hit a new low. ComRes found only 21 per cent believe he is a good leader. Professor Curtice said: “There must now be question marks about Clegg’s ability to recover from his unpopularity, which is beginning to be on a par with that endured by Gordon Brown. Leaders rarely recover popularity once most of the public have decided to write them off.” There is little either for Mr Miliband to celebrate. ComRes found only 22 per cent deem him a good leader, compared with Mr Cameron’s 39 per cent. Ominously for Labour, none of the last three opposition leaders with a negative satisfaction rating after eight months in the post – William Hague, Iain Duncan Smith and Lord Howard – went on to become prime minister. – the Independent

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