Pm sunak's 'horror' 55% pension tax to hit millions of savers

Millions of pensioners hand over a staggering 55 percent of their retirement savings to the taxman under a brutal tax that is too complex to understand. Sunak doubled down on the tax when he

was Chancellor in his Budget in March last year, freezing the threshold at which people pay for five years. With Sunak almost certain to become PM, there is almost zero chance that this tax

will be eased until at least 2026. Current Chancellor Jeremy Hunt has already warned that no more taxes will be cut as he looks to restore “confidence” and “stability”. He also said that

his priority now was protecting the most “vulnerable”, as the cost of living crisis rages. There is now almost no chance the Conservative Government will act to solve a long-running pension

issue that could soon affect more than two million savers.  If Labour wins the next election, Kier Starmer would be even less likely to reverse this cruel tax attack, too, as it mostly

punishes higher earners. The pensions lifetime allowance, or LTA, caps the maximum you can save across all your company and personal pension schemes during your lifetime at an arbitrary

level. More than 1.6million had been caught by 2016 and the number will rise every year as the allowance remains frozen. Soon the number of victims could top two million and still keep

climbing. Those whose total pension pots exceed the LTA pay an incredible 55 percent tax on the excess to HM Revenue & Customs. The lifetime allowance stood at a whopping £1.8 million a

decade ago, so only the very rich got caught, It has been repeatedly slashed to today's level of £1,073,100. Sunak then froze it at that level until at least the 2025/26 tax year. Helen

Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said constant tinkering with the lifetime allowance means it is no longer something that only the wealthy need be

concerned about. “The reduction and subsequent freezing of it means many more people are being pulled into its web.” Morrissey added: “This complex system is quite simply nightmarish for

many people to navigate and it can act as a real disincentive to save.” READ MORE:  Britons alerted as ‘middle earners’ may fall into 55% pension tax trap Anybody who has saved more than £1

million in pensions is unlikely to attract much sympathy, especially at the moment. Yet many NHS doctors have been caught out, with some deciding to retire rather than pay this punitive tax.

Others trapped include those who have built up a large pot of company and workplace retirement savings. This is exactly what the Government has been encouraging people to do, to reduce the

burden on the state. Now they are being punished for the crime of investing successfully. Some could pay £165,000 to HMRC as a result of the LTA freeze. While sympathy may be in short

supply, the tax is badly planned and needs reform. A saver who is nowhere near the LTA could be pushed over after a few years of successful investment performance. Andrew Tully, the pensions

technical director at Canada Life, said any hope of reform of this "horrifically complicated" tax has now gone. DON'T MISS: BANK RAISES INTEREST RATES FOR SAVINGS ACCOUNTS TO

4.80% [INSIGHT] NATIONWIDE INCREASES INTEREST RATES AS INFLATION RISES [LATEST] 70-YEAR OLD WOMAN BOOSTS PENSION VIA SIDE HUSTLE [REVEAL] “Given Jeremy Hunt's latest announcements it

seems very unlikely we will see any increases to the lifetime allowance so it will remain frozen to 2026 at least. We already know Sunak's view, given his five-year freeze.” Tully

called the LTA “an arbitrary tax which penalises individuals who have enjoyed good returns on their investments”. He added: “There is also a significant disparity in the way benefits are

measured against the LTA, with members of defined contribution schemes treated much more harshly than members of defined benefit final salary schemes.” Tully said the government already has

a way much clearer method of limiting pension tax breaks for the well-off. This is known as the pensions annual allowance, and limits the maximum you can contribute while claiming tax relief

at £40,000 a year. Adding a lifetime allowance on top of that achieves nothing, Tully added. "All it does is create complexity and confusion.” He called for the Government to scrap the

lifetime allowance altogether while retaining the annual allowance. "That would massively simplify pensions at a stroke.” Yet this could be portrayed as more help for the wealthy and

almost certainly won't happen under Sunak or Starmer.