James Coney  

Pension freedoms' unintended consequences

James Coney

James Coney

Properly regulated advice should be safe and affordable for consumers. But it is up to the regulators to create a business environment that is conducive to firms thriving – not killing them off altogether.

Too toxic for the Tories?

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Cutting higher-rate tax relief on pensions (as we are led to believe HM Treasury is proposing) wouldn’t just kill off pension saving for reams of the population – it would be a nightmare to administer.

Why would you bother to save into a pension if you feared you might be a higher-rate taxpayer in retirement?

Cutting higher-rate relief means that for every £1 you earn, you get 80p in a pension and pay 20p tax. Then in retirement, that same 80p is taxed again at 40 per cent.

Even assuming you take the tax-free lump sum, this leaves you paying a total of 44p tax on your original £1.

In an Isa you’d only pay in 60p, but at least you’d get the same 60p out. Why bother? This would be so politically toxic for the fragile Tories that there is no way it will happen.

Property pay day

Uh-oh. I smell a whiff of another crackdown on property coming – this time on rent-a-room relief.

This £7,200 a year perk for lodgers has been abused by some landlords, HM Revenue & Customs seems to think.

And so in a finance bill this year we can expect some kind of residency test which will see whether landlords are living in the properties where they rent out a room.

Anyone making money from property is once again under the spotlight of HMRC.

James Coney is money editor of The Times on Sunday