Labour has announced sweeping changes to pensions, which will affect people with larger pots, as well as those with higher earnings.
Despite calls from the pension industry for a period of calm following the changes announced in last year’s Budget, Ed Milliband today announced a further series of measures, intended to meet the cost of cutting tuition fees from £9,000 to £6,000.
If they win the general election in May, Mr Milliband revealed the new Labour government would make the following changes:
- Pension contributions made by people earning over £150,000 will in future only get tax-relief at a rate of 20%, a large cut from the 45% relief their currently qualify for. This change will affect approximately 300,000 people
- The maximum amount an individual can pay into a pension each year and qualify for tax-relief, known as the Annual Allowance, will be cut from £40,000 to £30,000
- The maximum amount which can be held in a pension before tax charges are incurred will be cut from £1.25 million to £1 million
In his speech Mr Milliband said: “If left unchanged, the whole (university fees) system will have added £281 billion of debt by 2030.”
He went on to say “the scourge of debt from tuition fees is not only holding back our young people, it is a burden on our country”.
However the move has been criticised by pension experts who point out that the proposed changes come too quickly on the heels of Pensions Freedom, which have been widely credited with making saving for retirement more appealing.