Rachel Reeves could scrap pension perk which has been branded a ‘superpower’The government could scrap a major pension perk which Martin Lewis reckons is a “superpower”. Reports indicate that officials are now reviewing proposals for a flat 30% rate of pensions tax relief, a policy previously supported by Labour Party Chancellor Rachel Reeves in 2016 as a backbencher.
If implemented, this could generate up to £2.7 billion in revenue – while redistributing some advantage away from higher earners. “Many clients are already asking what a potential change in pensions tax relief might mean for their long-term plans,” says Brian Morman, Director at Brunsdon Financial.
“While no official reforms have yet been announced, it’s a good time to review your pension strategy and make sure it remains tax-efficient.”
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Spekaing previously, 52-year-old BBC and ITV star Martin Lewis said: “The most important thing to remember is the money you put into your pension is from pre-tax salary. So this is the superpower. You get tax relief.
“So as a basic 20% rate taxpayer, you’re putting £100 in, but of course when you get it in your pay packet 20% is being taken off. So to put £100 in only costs you £80. So you’re getting £100 investment for the cost of £80.”
Martin continued: “So for a basic rate taxpayer, that means you, if you’re putting in £80, you’re getting £160, double the money going into your investment, double your money from what’s coming out your pay packet.
“If you’re a higher rate taxpayer, £60 becomes £160, if you’re a top rate taxpayer – and some people might say it’s unjust they’re the ones that get the biggest but anyway – £55 is nearly being trebled to £160 going into your investments.
“That is just completely unbeatable. So in a way if you were not to do it, you’re giving up a payrise.”