Tax raid will close pension schemes
Price Waterhouse Coopers are warning that companies will close their final salary pension schemes if Chancellor George Osborne keeps changing the laws on pension schemes. The raids by Osborne on people’s retirement savings are damaging the workers’ confidence in the system and discouraging saving in the UK.
It is reported that Osborne will reduce the maximum amount people can place in their pension to £30,000 a year so that more of their income can be taxed. This move is clearly leading to more and more people losing faith in investing their money in a pension schemes.
Moreover, this move is contradictory since Ministers have often stressed on their wish to encourage more people to save. When asked about the rumoured move on pensions, Osborne said: ‘you will just have to wait and see’ but from what this rumour has already created, it seems such a move would lead to more loss for pension savers.
A cut in a person’s annual pension contribution to $40,000 would raise around $600 million per year for the Exchequer — while rising to £1.8 billion if it is decreased to £30,000.
PWC commented on this new tax raid, stating: ‘employers will further accelerate the closure of defined-benefit pension schemes as they become even more complex and expensive to run, and through fatigue with constant changes to the tax treatment’.
As a result of the endless interference on pension schemes by the government, as well as due to volatile financial markets and increased longevity, final salary schemes have declined significantly and unless the government decides to leave such schemes alone, pension savers will likely give up on the scheme, thus giving up on the hope of creating a financially stable future for themselves.
Nigel Green deVere group
Blog written November 3rd