Keir Starmer (Image: Getty)
Senior Tories have accused Keir Starmer of a “triple attack” on pensioners he said he would scrap the pension lump sum allowance if he wins next week’s general election.
Labour were forced to quickly deny it was happening, insisting Sir Keir had made an “old fashioned mistake”.
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But the Conservatives said the blunder will strike fear into millions of pensioners who don’t trust the Labour party with their hard-earned finances and benefits.
They have warned of a triple threat to pensioners.
Rishi Sunak has repeatedly warned that Labour will impose a “Retirement Tax”, by not honouring his Triple Lock Plus, meaning the new state pension will be dragged into income tax for the first time in history.
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Work and Pensions Secretary Mel Stride (Image: Getty)
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The Conservatives also claim that Labour will ditch the right to withdraw 25 per cent of your personal pension pot tax-free, leaving hardworking savers paying tens of thousands of pounds more in tax.
Furthermore, they suggest Labour won’t guarantee pensioner benefits, like Winter Fuel Payments, free prescriptions, free bus passes and free TV licences.
Labour denies the claims.
Work and Pensions Secretary Mel Stride: "Keir Starmer has made his three-point plan for pensioners abundantly clear - tax, tax tax.
"Throughout this campaign we have warned of Labour's plans to introduce a Retirement Tax, picking the pockets of pensioners to fill their spending blackhole.
"Now they've failed to deny taxing your personal pension pot, scrapping benefits like free TV licences and eating into your hard-earned retirement.
"Pensioners should know full well the risk of an unaccountable Labour supermajority. Do not surrender your wallets to them ."
Sir Keir’s blunder came during an interview on BBC Radio 5 Live when he was asked whether Labour would remove the option for people to take a 25% tax-free lump sum from their pensions.
Over-55s were given greater flexibility over how they could access their retirement savings by pension freedoms introduced from 2015.
But the Labour leader said incorrectly: “It runs out in a number of years.” He added: “We’re not going to renew it.”
Savers can usually take up to 25% of the amount built up in any pension as a tax-free lump sum.
Laura Trott (Image: Getty)
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New rules introduced in April this year capped this lump sum allowance at ￡268,275.
A spokesperson for Sir Keir said: “It was an old fashioned mistake.”
Asked whether the Labour leader had accidentally let an undisclosed Labour tax plan out of the bag, the spokesman insisted: “Absolutely not.”
But Laura Trott, Chief Secretary to the Treasury said: “Keir Starmer has now opened up a third front to Labour’s war on pensioners by making it clear the ability to draw on 25 per cent of your pension pot tax-free is not safe under a Labour government, punishing people who have saved their whole lives.
"Labour have already confirmed they will introduce a Retirement Tax on your State Pension and refused to guarantee pensioner benefits.
“Do not surrender your hard-earned pension to Starmer’s Triple Threat to Pensioners. Only a vote for the Conservatives on 4 July will keep your pension safe.”
Asked whether Labour was making a solid promise not to change the current system, as opposed to simply having “no plans”, a spokesman said: “It’s a firm commitment.”
Sir Steve Webb, a former pensions minister and partner with LCP, an actuarial firm, said the government would be unlikely to scrap the pension lump sum allowance.
“Politically, abolishing tax-free cash is unimaginable,” he said.
“Many millions of workers have saved into a pension in the expectation of a nice tax-free lump sum at the end, and scrapping it would be political suicide.”
However, he said it was “possible” a future government might reduce the generosity of the tax-free lump sum allowance.
“For example, the current lifetime cap of just over ￡268,000 could be reduced to ￡200,000 and still be at a level that had no effect on the vast majority of pension savers, and with protections built in for those already over the limit.”
Tom McPhail, director of public affairs with the Lang Cat, a consultancy for the pensions sector, told the FT a reduction to the pensions lump sum allowance “would be easy enough to do” early into Labour’s term, but the challenge would be how to do it fairly.
McPhail said that If Labour was feeling “mean-spirited”, it could change the pension lump sum allowance in the first week after taking power, which would shut the door on anti-forestalling behaviour. “This would be the nightmare scenario,” he said.
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He said Labour could also take a more considered view on pensions tax relief, which would see it announce any changes in a future fiscal statement after it had “looked at the books”, with any reforms coming into effect in the following tax year.
“Labour has said they are not going to do a Budget in the first ten weeks so we are not expecting an immediate fiscal event,” he said