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Daily Mail
5 days ago
- Business
- Daily Mail
Hands off our pensions, ex-ministers tell Reeves amid fears savers will rush to withdraw cash to avoid being hit
Rachel Reeves is under mounting pressure to rule out a punishing tax raid on pensions to help fund her lavish spending spree as the economy tanks. Fears are growing that the Chancellor will target the retirement pots of millions of workers in the autumn as weak growth blows a black hole in her plans. Two former pensions ministers – Sir Steve Webb and Baroness Altmann – have joined the chorus of experts urging her to rule out such a raid. But the Treasury has refused to do so – fuelling speculation that pensions are in her sights. Months of rumours could prove highly damaging if – as was the case before the last Budget – it leads to a rush of savers withdrawing cash from their pension pots early to avoid being hit. Savings and investment company AJ Bell last week called on the Chancellor to introduce a 'pensions tax lock' that ruled out any changes for the remainder of this Parliament. This, it said, would 'offer investors the confidence to plan for the long term'. Webb, now a partner at pension consultants LCP, echoed those comments. 'Once again we have the return of uncertainty about the pensions tax regime,' he told the Mail. 'This annual spectacle is deeply unsettling for what is supposed to be a long-term business. 'It would be hugely valuable for the Chancellor to set out her position on pension tax breaks and then leave things unchanged for the rest of this Parliament so that people know where they stand and can plan accordingly.' Altmann agreed, warning speculation about tax changes is 'undermining people's ability to plan ahead and damaging confidence in pensions'. A raid on pension pots could see Reeves cut the maximum amount savers can withdraw tax free from the current limit of £268,275. Such a move was speculated before the Budget last October – leading to some savers withdrawing their money early despite warnings it could leave them worse off in retirement. Other options include taxing pension contributions, cutting the annual allowance or reinstating a lifetime allowance. Sarah Coles, head of personal finance at Hargreaves Lansdown, said: 'It's important to learn the lessons from the speculation ahead of last year's Budget. We can't have a repeat of this for a second year.'
Daily Mail
10-06-2025
- Business
- Daily Mail
Hundreds of thousands of pensioners to face 'stealth raid' on winter fuel payouts
Hundreds of thousands of pensioners will face a stealth raid on their revived winter fuel payments, experts claim. Chancellor Rachel Reeves announced a humiliating U-turn this week that will see the payment restored to nine million pensioners this winter. Only those with taxable incomes of more than £35,000 a year will lose out, under the new proposals. But neither Downing Street nor the Treasury would guarantee yesterday that the new threshold would rise in line with inflation in future years, meaning thousands more pensioners are likely to lose their annual payments as the state pension increases. The payments are worth £200 a year to most pensioner households or £300 where one person is over 80. Prime Minister Sir Keir Starmer (pictured) yesterday said cutting the winter fuel allowance last year had been 'the right thing' to do as the economy was 'broken' when Labour came to office, meaning 'difficult decisions' were needed to shore up the public finances Former pensions minister Sir Steve Webb, now a partner at the pension consultants LCP, said: 'The Government's own figures clearly suggest they expect the number of losers from the new policy to rise each year. 'With around two million pensioners currently over the £35,000 threshold, this number could easily rise by another half a million by 2030.' Prime Minister Sir Keir Starmer yesterday said cutting the winter fuel allowance last year had been 'the right thing' to do as the economy was 'broken' when Labour came to office, meaning 'difficult decisions' were needed to shore up the public finances. He also claimed that the economy has since 'stabilised', allowing the decision to hand back the payments to more pensioners.
Telegraph
10-06-2025
- Business
- Telegraph
500,000 more pensioners at risk of losing winter fuel payments under Labour
An extra half a million pensioners could lose their winter fuel payments by the end of the decade, new analysis suggests. Rachel Reeves was forced into a humiliating about-turn on Monday after announcing pensioners with incomes of less than £35,000 a year would be eligible for the benefit. It means an extra 7.5 million pensioners will receive the payment, worth up to £300, this year. But experts point out 500,000 of these will lose the payment by 2030, as rising incomes collide with the payment. Officials at the Department of Work and Pensions (DWP) refused to comment on Monday on whether the threshold would be increased in line with inflation or the so-called 'triple lock' each year. Government sources told The Telegraph that no more detail would be provided until the next Budget, when the measure will be evaluated by the Office for Budget Responsibility (OBR). If the threshold remained the same, more pensioners would become ineligible each year as their annual incomes increased. Sir Steve Webb, former pensions minister and partner at pension consultants LCP, said: 'The Government's own figures clearly suggest that they expect the number of losers from the new policy to rise each year. 'With around two million pensioners currently over the £35,000 threshold, this number could easily rise by another half a million by 2030. 'This could end up being another way in which governments use inflation to quietly raise additional revenue year-by-year.' This is not the only form of fiscal drag faced by taxpayers. The income tax thresholds have been frozen until 2027-2028, which will drag more than one million taxpayers into paying additional rate tax. This phenomenon, known as 'fiscal drag', represents a huge stealth tax raid. Income tax thresholds have been frozen since 2021-22, dragging millions of taxpayers into the income tax net for the first time, or into higher brackets. The additional rate threshold was initially frozen at £150,000 before being reduced to £125,140 in 2023. HM Revenue & Customs (HMRC) data via a Freedom of Information request showed that the number of people aged 65 and over paying the top rate of tax more than tripled from 44,000 in 2021-22 to an estimated 137,000 in 2025-26. Sir Steve also questioned the Government's numbers on how much the changed policy would save the Exchequer. He said: 'Our analysis also suggests that the new policy will raise less money next year than the headline figure quoted of £450m. 'Assuming an initial yield of around £350m, roughly two thirds of this will be wiped out by higher pension credit costs. The net revenue from the policy is likely to end up barely a tenth of the amount banked by the Chancellor when she presented her last Budget.' While the Government said that the policy measure would save £450m, it also said that it expected to spend £1.25bn on the payments. Adding the figures together, this would have meant a total saving of £1.7bn if the Chancellor had not reversed the policy. But figures published in last year's Budget suggest that the first time the policy came close to raising £1.7bn was in 2029-2030. In the House of Commons on Monday, shadow secretary for work and pensions, Helen Whatley, said that the policy would save as little as £50m. She added: 'After all this, the savings for the Treasury this coming year may be as little as £50m.' Ms Whatley described the about-turn as 'the most humiliating climbdown a Government has ever faced in its first year in office'.
Telegraph
09-06-2025
- Business
- Telegraph
Reeves's winter fuel raid to raise £1.2bn less than expected
Rachel Reeves's winter fuel raid will raise just £250m, experts have claimed, after the Chancellor was forced into an embarrassing about-turn. The Treasury previously estimated the controversial decision to axe universal winter fuel payments would raise £1.5bn this year. However, experts on Monday said the real figure would be just £250m, leaving the Chancellor in a £1.25bn deficit. Ms Reeves announced she would reinstate the benefit for 75pc of pensioners amid mounting pressure from Labour MPs and following the party's abysmal local election performance. Under than changes, retirees whose annual income is below £35,000 will be entitled to a payment of up to £300. Revised figures from the Treasury state the policy would still raise £450m, but Sir Steve Webb, a partner at pension consultant LCP, said it had ignored the additional £200m it has spent following a surge in pension credit applications. It is estimated there were 57,000 additional claims for pension credit following Labour's decision to revoke winter fuel payments from 10 million pensioners last July. Sir Steve said: 'These changes wipe out most of the extra revenue which the Government was expecting to get from the winter fuel payment policy. 'Not only has the Government knocked more than £1bn off the expected revenue, but it has also had to find more than £200m per year extra because of the surge in pension credit claims. 'Overall, the amount raised looks tiny relative to the political damage which the whole episode has caused to the Government.' Rachel Vahey, of investment firm AJ Bell, said 'the net saving from the whole exercise is likely to be miniscule', citing the administrative costs of enforcing the new threshold and the rise in successful pension credit applicants. She said: 'The route it has chosen is the most convoluted and difficult. It will pay out the benefit to every pensioner, but then claim it back from 25pc of them – those with an income of more than £35,0000 – through a tax adjustment. 'This not only creates tax chaos for over a million people, but it creates a cottage industry for the Government to impose the clawback, creating additional admin which will cut into the estimated £450m saving to taxpayers.' Julian Jessop, of the Institute of Economic Affairs, said: 'It is unclear whether the new plan will deliver any significant savings, but the clawback is certainly more complicated. 'The only positive from all this is that more low-income households who are entitled to pension credit are now claiming this benefit. But this will further reduce any gain for the Treasury.' Mel Stride, the shadow chancellor, described Ms Reeves as a 'tin foil Chancellor', accusing her reversal of being unfunded and 'policy made on the hoof'. He said: 'There was no justification for leaving pensioners in the cold last winter. Labour's U-turn on winter fuel shows it was completely unnecessary, and it raises more questions than it answers. 'They already spent the savings from this policy on inflation-busting pay deals for the unions. So where is the £1.25bn needed to pay for this U-turn going to come from? Our tin foil Chancellor says costs will be accounted for at the Budget – in other words, she doesn't yet know.' Ms Reeves's new threshold means nine million pensioners will now get the annual payment worth £200 per household, or £300 per household where an occupant is aged over 80. The payment is split between members of a household, however, under the new system pensioners will qualify based on their individual income, a decision Maxwell Marlow, of the Adam Smith Institute, said was 'nothing short of baffling'. He said: 'Regarding the specific makeup of households, it now appears they are relying on data that differs from that used by the Department for Work and Pensions – the department that is actually responsible for administering the benefit. This discrepancy urgently needs to be addressed to prevent further confusion. 'If I were a pensioner and earned £100,000, whilst my partner earned nothing, we would still receive £100 despite having money to heat the home. This raises serious questions about the fairness of the policy and demonstrates the need for a thorough review.'
Telegraph
05-06-2025
- Business
- Telegraph
Reeves hands herself ‘dangerous' powers to control pension pots
Rachel Reeves has granted herself 'dangerous' new powers to direct where millions of savers' pension cash is spent. The Government's Pensions Bill includes sweeping provisions that will allow the Chancellor to force pension funds to invest in private equity, debt and land in an attempt to boost the UK economy. Details of the new legislation were published on Thursday. The Government has insisted that savers' interests will always be put first, with mandating powers only serving as a backstop to ensure investment in British assets. However, Sir Steve Webb, a former pensions minister, said: 'Legislating to allow governments to tell pension schemes how to invest is a very dangerous precedent. 'Whilst ministers offer assurances that this is just a backstop power that they hope not to use, the precedent has been set. This Government or a future government could use a power of this sort to promote their own political agendas, potentially to the detriment of pension savers.' Sir Steve, who is now a partner at Lane, Clark and Peacock (LCP), said the law left the door open to sweeping changes that could destabilise the market. The former Liberal Democrat MP said the powers could be used by a future Reform government to instruct funds to abandon 'woke' investments, including net zero, for example. Sir Steve said: 'We already have trustees whose job is to make sure that the member interest is protected, based on expert advice over things like investment strategy, and these decisions should be beyond the reach of politicians – of whatever party'. 'Very bad precedent' A so-called sunset clause in the Bill means the power to mandate investment expires at the end of 2035. However, Sir Steve pointed out that this still left the door open for a new government to instruct pension funds to invest in a whole range of assets. While a separate clause suggests a review of the powers 'must be conducted before the end of the period of five years beginning with the day on which the regulations come into force', Sir Steve said this would still be well into the next Parliament. 'As long as the sunset clause hasn't set, as it were, it is a power sitting there on day one. So a new government could come in, it doesn't need to consult, it doesn't need to draft legislation, and it doesn't need to spend nine months getting it through parliament. It's there and ready to run,' he said. The Bill, published on Thursday, hands the Government powers to 'prescribe' investments in 'private equity', 'private debt', 'venture capital' and 'interests in land', which it continues to say are just 'examples' of asset classes. The Government can also instruct whether those investments 'link an asset to economic activity in the United Kingdom' or even more directly are 'located in the United Kingdom'. Richard Tice, the deputy leader of Reform, has repeatedly said he will scrap 'net stupid zero' policies if the party forms the next government. Sir Steve said the party could use the Pensions Bill to partly reshape the investment landscape in the UK. He said: 'The Government has just given themselves powers to tell pension schemes how to invest. And these powers appear to run for at least five years from the passing of the Bill. So Nigel Farage may get to use them, right? 'So just imagine we have a Reform government that's not big on woke. And they say: oh we've got an act of parliament that already allows us to tell pension schemes they can't invest in net zero. 'The Government giving itself power to tell schemes how to invest, is just a very, very bad precedent.'
