It\u2019s a 55% levy on people who\u2019ve saved too much into their pension pots, through decades of hard work and careful planning.<\/p>\n
It punishes those who\u2019ve done the right thing by taking personal responsibility for their retirement.<\/p>\n
The tax is also a mess. It\u2019s so “heinous” and “horrifically complex” that even financial advisers struggle to explain it<\/a>, according to Tom Selby, director of public policy at AJ Bell. You can be under the limit one year and over the next.<\/p>\n And if you unwittingly cross the line at any point, you’re clobbered by HMRC<\/a>.<\/p>\n This isn\u2019t a fair or transparent way to raise revenue. If Labour wants to target wealthier savers, there are simpler and more honest ways to do it.<\/p>\n But Rayner doesn\u2019t care about that. She just wants to grab some more tax.<\/p>\n And in an ironic twist, the only person standing in her way is Chancellor Rachel Reeves. Who has form herself when it comes to hiking taxes.<\/p>\n The levy in question is the pensions lifetime allowance (LTA). It caps the total value of pension pots people can build across workplace and personal schemes.<\/p>\n Crucially, it\u2019s not based on what people contribute, but on how well their investments perform.<\/p>\n So if you save diligently for decades and make sensible investment decisions, you\u2019re hit with a tax for doing too well.<\/p>\n NHS doctors are particularly hard hit. Thousands have taken early retirement as a result, hampering efforts to cut waiting lists.<\/p>\n Rayner is on the warpath. She is said to be furious at Reeves\u2019s reluctance to raise taxes instead of cutting public spending.<\/p>\n Rayner has privately demanded that Reeves slap higher taxes on pensioners<\/a>, starting with the reinstatement of the lifetime allowance (although she doesn\u2019t stop there).<\/p>\n The LTA was only scrapped by former Tory Chancellor Jeremy Hunt two years ago<\/a>, after intense pressure from financial experts and pension campaigners.<\/p>\n But Labour immediately denounced it as a tax break for the Tories<\/a>\u2019 rich mates, and pledged to bring it back if they won power.<\/p>\n Reeves also backed restoring the LTA, but Labour quietly dropped it from the General Election manifesto.<\/p>\n So Rayner may be pushing at an open door.<\/p>\n On paper, this may look like an easy win. The lifetime allowance previously only hit those with pension pots worth more than \u00a31,073,100.<\/p>\n So the majority of voters may not care. Many will applaud it, seeing it as a tax on wealth. That would be a mistake.<\/p>\n This tax is not just punitive \u2013 it\u2019s confusing and costly to monitor.<\/p>\n If Labour really wants to limit tax breaks for the wealthy, it should cap annual contributions, not penalise people years later because their investments did well.<\/p>\n And while today\u2019s LTA threshold looks high, it\u2019s a moving target.<\/p>\n Originally set at \u00a31.8million, it was repeatedly cut and frozen.<\/p>\n If introduced, you can be sure it will remain frozen for years or even decades, catching more of us every year.<\/p>\n Worse, it won’t actually raise more tax. Over time, many higher earners will retire once they’re close to breaching their LTA, and HMRC<\/a> will lose income tax and national insurance receipts as a result.<\/p>\n Plus the NHS will lose hugely experienced doctors.<\/p>\n