Labour’s threat to YOUR pension
£24bn hike in corporation tax £9bn raid on dividends Major firms to be nationalised State to seize 10pc of shares
LABOUR has declared war on pensions with a raft of measures that will hit millions of families’ nest eggs.
Tax rises, the seizure of company shares and plans to nationalise vast swathes of the economy will depress the value of stock market investments, according to experts.
And millions of savers with a pension – not just the wealthiest in society – will feel the pain.
Labour has claimed its tax rises will hit only the best-paid 5pc of workers – those earning more than £80,000 a year. But just £5.4bn of the £83bn that Labour plans to raise to fund its spending promises comes from increasing income tax on high earners.
According to Labour’s own figures, another £23.7bn comes from raising corporation tax from 19pc to 26pc, while a further £9bn comes from higher taxes on dividends.
Torsten Bell, chief executive of thinktank Resolution Foundation, said: ‘Far more than the top 5pc of the workforce will be affected. As an example, higher corporation and dividend taxation will have a material effect on defined contribution pension schemes.’
As well as hiking taxes, Jeremy Corbyn and John McDonnell (pictured) plan to nationalise the railways, water companies, energy firms, Royal Mail and the broadband arm of BT.
Labour will also take control of 10pc of all the largest companies in a move labelled ‘draconian’ that is likely to alarm foreign investors, leading to share prices dropping further.
Adrian Lowcock, head of personal investing at investment platform Willis Owen, said the combination of policies was ‘very negative for UK plc’ and in turn the value of pensions.
He said: ‘These policies could significantly impact existing savers and investors, as well as affect people’s pension savings.’
Matt Kilcoyne, of think-tank the Adam Smith Institute, said: ‘Labour’s heavy business taxes will see companies slam the brakes on investment, leading to lower productivity and wages, and the party’s tax grabs are an attack on pension savings. These policies will leave some of us worse off straight away and all of us poorer in the long run.’
Dividends are currently taxed at a lower rate than income. But in a move that will hit entrepreneurs and the self-employed who pay themselves through dividends, as well as savers with money in the stock market, Labour plans to align dividend tax and income tax. It is also planning to hike capital gains tax. ‘Labour will tax capital gains at the same level as income tax and abolish the lower income tax rate for dividend income,’ it said in its manifesto.
Along with hikes in corporation tax, it is feared this will make Britain a less attractive place to invest, depressing share prices and hitting the value of savings and pensions. Plans to seize 10pc of shares in any firm with more than 250 staff – in order to pay workers dividends of up to £500 each – are also likely to cast a shadow over the UK as a good place to invest. And Labour has repeatedly said it would not pay market value for companies it plans to nationalise.
Nigel Peaple of the Pensions And Lifetime Association said: ‘If a Labour Government failed to pay full compensation for any companies it took ownership of, millions of workplace pension savers in the UK could see the value of their pension funds hit directly.’