Anger was growing last night as it emerged Philip Hammond could raid middle-class savers’ pensions to fund a public spending spree.
The Chancellor is reportedly plotting to cut the tax relief that encourages savers to build up a nest egg, as he tries to find an extra £20billion for the NHS.
Sources claim that the raid would be targeted at only the highest earners, but critics fear it would set a dangerous precedent for a wider assault on pensions.
Baroness Ros Altmann, an ex-pensions minister, said: ‘I advise the Chancellor to think very, very carefully before messing around with tax relief on pensions.
‘There’s a huge amount of resentment against changes of this kind, particularly among Conservative voters, because there would be quite a lot of losers.’ She said simply using the money for something else would risk a backlash from savers.
Steve Webb, also a former pensions minister and now policy director at savings firm Royal London, said: ‘Pension tax relief shouldn’t just be used as a pot of cash when money is short. If we’re going to change pensions and tax, let’s think about it, let’s plan and let’s give people certainty.
‘Let’s not just have broke chancellors dipping into the pot when they’re short of a bob or two. Pension taxes ought to be very predictable because they’re of long-term importance … this constant tinkering is no way to run a tax system.’
Under present rules, workers do not pay any income tax on their pension contributions unless they save more than a certain amount a year. This ‘annual allowance’ limit is £40,000 for most people, but it is feared that the Treasury may seek to change this so that more contributions are taxable.
Under a separate ‘lifetime allowance’, savers face being taxed if they build up a pot worth more than £1million.
Although this sounds like a large amount, it would only guarantee a retirement income of £30,000 a year rising in line with inflation.
A senior Government source told The Mail on Sunday that the £38billion of annual pension tax relief is ‘one of the last remaining pots of gold we can raid’. The Treasury could also scrap a long-standing tax break for investors who back small businesses to raise extra money, and may hike duties on spirits.
A shake-up of the pensions system could spark fears that the Treasury is willing to sacrifice prudent savers who do not want to rely on state handouts, while loosening the purse strings for everyone else.
Former chancellor George Osborne plotted a similar attack on savers in 2016 but was forced to axe the plan after an outcry and a Daily Mail campaign.
A Treasury spokesman said: ‘We don’t comment on Budget speculation.’