Pension changes net billions for Treasury, says specialists’ union

Pension policies announced by the current Chancellor in his Budget and Autumn statements have yielded more than £40bn for the Treasury, Prospect, the specialists’ union, reveals today (Tuesday).

The union analysed the Office for Budget Responsibility’s policy costings for each of the Budgets and Autumn Statements delivered by the Chancellor. This showed a £40bn yield for the various pension announcements for the years that the OBR provided estimates.

Prospect’s pensions officer, Neil Walsh, said: “These figures show that George Osborne cannot resist dipping into people’s pensions to meet his fiscal targets.

“He takes advantage of the fact that the rules he changes are generally poorly-understood. He would be the first to attack these stealth raids if he were in opposition.”

The bulk of the yield, more than £20 billion, comes from various policies restricting tax relief. Other changes have also had a significant impact, including:

• switching the index used to uprate pensions
• abolishing contracting out of part of the state pension and
• increasing pension contributions for public sector workers.

The Chancellor even managed to create savings of more than £1bn by delaying the implementation of automatic enrolment for some businesses.

“The flagship Budget 2014 announcement of greater freedom over how to access pension pots was typical of the Chancellor’s approach.

“It was estimated to bring in £3 billion in the short-term as people cashed in their pension pots, but at a longer-term cost as a future Chancellor would have less pension income to tax,” said Walsh.

“In ten of his thirteen Budget or Autumn statements, the Chancellor has implemented changes to pensions that delivered a significant yield.

“Prospect estimates that the cumulative impact of the measures announced to date will exceed £80bn by the time of the next general election.

“With a major announcement on pension tax relief expected in the Budget next month, this analysis reminds us that we will have to scrutinise the policy costings to see whether the Chancellor is dressing up a stealth raid on pensions as reform. He has form on this and the fiscal position gives him limited room to manoeuvre to meet his targets,” Walsh concluded.

Download the document with the union’s costings from: https://library.prospect.org.uk//download/2016/00412

For more information, please contact:

Neil Walsh:                  [email protected]                            

Marie McGrath:           [email protected]               tel 020 7902 6615