Jeremy Hunt warned against 'alienating' voters over £10bn tax raid on pensions savings

6 November 2022, 10:37 | Updated: 6 November 2022, 15:29

Sir Steve Webb has warned against the move
Sir Steve Webb has warned against the move. Picture: Alamy

By Emma Soteriou

Chancellor Jeremy Hunt has been warned against a £10 billion tax raid on pensions savings in a bid to plug a £50 billion blackhole in public finances.

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Mr Hunt is in discussions over changing tax rules intended to encourage employees to save into their pensions.

The rate at which income tax relief is applied for higher-rate taxpayers could be reduced from 40p to a flat rate as low as 20p, according to the Telegraph.

Pension tax relief costs the Exchequer £42.7 billion - £22.9 billion being relief on income tax and £19.8 billion being on National Insurance contributions.

A report by the Pensions and Lifetime Savings Association found the move would raise between £8 billion and £10 billion a year.

A Treasury source said the option "has been discussed" and is still on the table but no "white smoke" has yet emerged.

Read more: Threat of biggest tax burden since World War II as Jeremy Hunt's November Budget 'could contain £25b in tax hikes'

Read more: 'The government cannot do everything,' Rishi Sunak tells British people as the country plunges into recession

Mr Hunt will deliver the Autumn Statement on November 17.
Mr Hunt will deliver the Autumn Statement on November 17. Picture: Alamy
Sir Steve Webb is the former pensions minister.
Sir Steve Webb is the former pensions minister. Picture: Alamy

However, Sir Steve Webb, the former pensions minister, warned that the moves would "alienate" voters.

"£10 billion means five million, mainly Tory, voters losing £2,000 per year each," he told the paper.

"If you wanted to alienate your core vote by taking away the higher rate of tax relief then you have done the job."

Former Chancellor George Osborne was also warned off making a similar move in 2016, with backbenchers threatening a "riot" over a cut.

When asked about the plans this morning, Cabinet minister Oliver Dowden said "difficult decisions" would be made.

"There's an awful lot of speculation in the newspapers, some of it's correct, some of it's not correct," he told Sky.

"I can't go into any individual stories. But what I can say is there will be difficult decisions in that Autumn Statement."

The Autumn Statement was initially planned to be announced on October 31 but has since been pushed back.

It will be delivered on November 17.