New UK Tax Scheme Targets Pensions, Could the US be Next?
As a nation impoverishes it starts to feed upon the savings of its own people. In the US, it’s been mainly through inflation that devalues workers’ hard-earned dollars already in the bank. Eventually though, the government will also turn to tax increases as it must. The UK is already leading the way with a new tax plan designed to sap a greater share of wealth from its citizens’ existing retirement nest eggs, or as The Telegraph puts it, they “are facing a tax raid on their pensions.”
From The Telegraph:
“The amount that people can pay into their pension pot every year and still receive tax breaks is to be capped at less than a fifth of its current level. The maximum size of a pension pot that workers can accrue before high rates of tax apply is also likely to be significantly reduced by the Treasury. Accountants predict that the changes will hit more than 500,000 people, including middle-class professionals, savers who choose to pay lump sums into pensions to benefit from tax relief and self-employed businessmen. Some will face demands to pay tens of thousands of pounds in tax as a result.
“Other allowances, including a scheme that allows people to pay more into their pension during the final year of their working life, may also be scrapped. The changes are likely to take effect next April. It is the latest move by George Osborne, the Chancellor, designed to target higher earners. It follows the controversial decision to strip child benefit from higher-rate taxpayers and allow a rise in university tuition fees. The threshold at which higher-rate tax is payable is also being reduced.
“The Treasury is expected to announce today that the annual limit on payments that people can make into their pension and still receive tax relief will be cut to between £30,000 and £50,000. People can currently save £255,000 a year in their scheme and still receive relief on their contributions at the rate at which they pay income tax.”
The UK Treasury is putting the new tax plan into place — that will impact more than a half-million citizens — in hopes of saving about $12.5 billion over the course of three years. In one fell legislative swoop the government will be able alter the retirement plans so many of its citizens reasonably assumed they had already figured out. According to one quoted pension expert, “Given the tone of the Treasury’s thinking, the prospects look even darker for pensioners than initially thought.” And, if the United Kingdom can make headway with these new taxes, it won’t be tough for the United States to be far behind.
You can read more details in Telegraph coverage of the UK middle class getting hit again with tax raid on pensions.