George Osborne has already been accused of hitting pension pots hard with the introduction of a ‘granny tax’ which is set to shave £285 off pension pots annually.
In addition to reducing the rate of tax relief for millions of pensioners, new government proposals will see a further £17 a week in ‘savings credit’ lost from the pensions of 105,000 new retirees. This is according to estimations made by the Labour Party.
The changes, which are set to come into effect from 2016, will mean that a pensioner with a state pension income of £124.45 and retirement savings of £44.55, would lose a weekly amount of £17.25 in savings credit.
2016 will see the introduction of a single, flat-rate pension of approximately £140 per week. You can compare a wide range of pensions with Money Expert.
Commenting on the new tax policies, Liam Byrne, the shadow work and pensions secretary, said:
“George Osborne has been caught bang to rights plotting another secret raid on hard-pressed pensioners. First, we had the Granny Tax. Now we've uncovered Granny Tax Mark 2: a £900 cut for pensioners who did the right thing and saved some money for retirement.”
The Labour Party’s view is supported by the Pensions Policy Institute, which argues that the new system will inevitably mean that some pensioners will miss out on savings credit income.
The Department for Work and Pensions (DWP) defended the government’s position by arguing that the changes would, in fact, provide a “fairer deal” for pensioners.
“No one currently getting savings credit will lose it under a single tier system,” a spokesman said. “Over a million pensioners are currently missing out on means tested Pension Credit despite the efforts of successive Governments to get people to claim.
“A single tier pension set above the level of the basic means test will give a fairer deal for women and will lift pensioners out of means testing - ensuring a decent and secure income in retirement.”
However, according to the government’s own research which was published last month, the new flat-rate pension: “could lead to lower incomes for individuals would have been eligible for savings credit.
You can compare pensions with Money Expert.