The DWP enquiry into intergenerational fairness closed today amid claims that the pension tax review risks inflaming intergenerational tension
The inquiry aims to answer the question of whether the current generation of people in or approaching retirement will over the course of their lifetimes have enjoyed and accumulated much more housing and financial wealth, public service usage, and welfare and pension entitlements than more recent generations can hope to receive.
Hargreaves Lansdown says retirement prospects are up to 1/3rd lower for today’s workers, compared to existing pensioners, adding that the pension tax review could exacerbate existing inequalities and undermine social cohesion. The firm says current retirees have been ‘double tax winners’ enjoying high tax relief when saving and low tax rates when retired.
The firm has warned the DWP enquiry that the Chancellor’s forthcoming pension tax review risks inflaming intergeneration tensions by exacerbating the inequalities which already exist between today’s pensioners and younger workers.
Hargreaves Lansdown head of retirement policy Tom McPhail says: “The average private pension wealth held by those aged around 60 is around £149,300. By comparison today’s 40 somethings can look forward to an average private pension pot of just £112,000.
“Today’s pensioners have benefitted from the tax system twice over, having received pension tax relief at rates around a quarter higher than today’s workers, whilst now paying a low basic rate of tax in retirement. The average basic rate of pension tax relief between 1973 and 2014 was 26 per cent. For higher rate taxpayers it ranged between 40 and 75 per cent. In retirement now, most pensioners are paying no more than 20 per cent income tax.”
