Daily Archives: February 15, 2012

I wrote this week about talks between the Tories and Lib Dems about the possibility of lowering the cap for how much workers can put into their pension pots while still enjoying tax relief.

Since then a couple of pensions experts have got in touch to explain some further implications of the measure, which mean that for two reasons, it could be more controversial than I first realised.

Firstly, I suggested that people enjoying the maximum 50% tax break enjoy a 50p top-up to their pension pot for every £1 they put in.

In fact, the relief is worth even more, because the amount is a tax relief calculated on pre-tax income. So if you qualify for the 50% relief, and put in £1, your tax is waived, meaning that the government has essentially put in 50p of the £1 you put it. Cancelling this for some people would therefore be even more of a blow than I first calculated.

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Ping pongAnother day, another Lords defeat for the government. Last night, peers voted by a majority of only 10 to moderate proposals to cut housing benefit from people in council houses who have spare rooms. Under the amendment passed, war widows, foster carers and disabled people would be exempt from the cut, which DWP says would cost £100m.

Many within Number 10 are delighted at this defeat. They say that the more peers defeat the welfare bill, the more it keeps these popular proposals in the news. It reminds voters of some of the government’s most vote-winning schemes and helps paint the Lords and Labour as out of touch. One senior coalition source told me that it was a “win-win” situation, saying:

Obviously we’d like to get the reforms through and onto the statute book, but we’re quite happy for this to go on a bit longer.

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