A Timmid measure reinforces UK pensions apartheid
At the lower end of the income scale, Britain’s pensions apartheid is well established. Public sector workers are guaranteed an index-linked pension based on their final salary, while private sector workers must just hope their contributions are enough to buy a decent income. Now it is to be applied at the top end as well.
Stephen Timms is the poor sap with the task of cleaning up the trail of ordure left by his boss, Alastair Darling, at the UK Treasury. Two months after the shambles that was the UK Budget, he’s still hard at it, trying to nail down the tax rules for a year that’s a quarter gone.
In April, the Chancellor introduced the concept of “anti-forestalling”, a term coined to prevent people using the existing rules on pension contributions (introduced by Labour) before new ones designed to achieve the opposite effect can be imposed. Darling had no time to think about the details, so he left it to Timms to sort them out.
Timms consulted, and has now administered a brisk kick in the teeth to the highest earners. Those earning over 150,000 pounds will be allowed full tax relief on up to 30,000 pounds of contributions, rather than the 20,000 pound ceiling proposed in the Budget. Even this derisory concession is only available to those who have contributed at least that much annually over the last three years.
Well, serves the fat cats right, you may say. They’ve had it too good recently. Perhaps, but the Treasury’s attack is highly selective. Anyone who used to make “regular” contributions can carry on as before, allowing those in schemes to escape penalties. “Regular” is defined as at least quarterly, neatly trapping those who may have little idea of how much they will earn until towards the end of the tax year.
Just as neatly, it allows those at the top of schemes to escape scot-free, including the Permanent Secretary at the Treasury, whose department has designed these vindictive rules. Now there’s a stroke of luck.