BRITONS ought to save more, George Osborne has often said. So it might seem strange that in his budget speech on July 8th the chancellor removed some big incentives for people to squirrel money away. Those earning over £150,000 ($230,000) will now be able to save less towards their retirement without paying tax. The policy is popular with voters, who don’t see why the rich should get tax relief, and it brings valuable revenues into the exchequer. So why are the technocrats shaking their heads?
Two simple principles are behind the current pensions tax system. First, if you tax people on their income and then again on their savings, they will be reluctant to put as much money in the kitty. Second, people with lumpy incomes—from entrepreneurs to sports stars—should be able to save as much into a pension as those with steadier income streams. At the moment, people can make pension contributions up to £40,000 a year free of tax. At the other end, once the contributions have been turned into a pension and start to pay out, the tax man pounces.
The system is not perfect. It has some oddly generous features, such as the option to take...Continue reading
via Brian Rushton, A raid on the future
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