Your pension’s at risk like never before as leaks point to Labour’s devastating plan. This is what you need to know, revealed by financial guru JEFF PRESTRIDGE

Slowly, but surely, we are beginning to learn what the Chancellor of the Exchequer has in store for our pensions come the Budget on October 30.

Sadly, it doesn’t make for particularly pleasant reading (more the horror of Stephen King than the joie de vivre of Jilly Cooper).

With less than three weeks to go until Rachel Reeves’ version of Pensions Doomsday, it looks that things can only get worse- rather than better – on the pensions front.

Yes, ladies and gentlemen, the Chancellor has turned Labour’s 1997 election campaign song (D:Ream’s Things Can Only Better) on its head. The 2024 version is now Things Can Only Get Worse (when it comes to pensions and our personal finances in general).

So, what have we found out so far? Well, leaks from Treasury sources earlier this week indicate that a radical reform of tax relief on pension contributions has now been put on the back-burner (she could resurrect the idea in a future Budget if the Government’s finances are in an unholy mess).

The idea was that instead of the amount of tax relief being based on whether you are a basic, higher, or additional-rate taxpayer, a flat rate of relief would be applied. So, instead of respective tax relief of 20, 40 and 45 per cent, the three bands of taxpayer would all get the same rate – say 30 per cent. Great for basic-rate taxpayers, but bad news for the mounting bands of higher and additional-rate taxpayers.

You would have thought that Ms Reeves would have loved introducing such a radical pensions overhaul. Egalitarian, socialist, very political, an effective tax on the ‘wealthy’.

But she chickened out because she was warned that it would upset up to one million public sector workers who would have lost out because of being higher or additional-rate taxpayers. When public sector unions bark, the Chancellor comes to heel.

Yesterday, we learnt a bit more about pensions at Prime Minister’s Questions (PMQs). An in-form and on-fire Rishi Sunak (still the Opposition’s numero uno) pressed Sir Keir Starmer on whether the Government would impose National Insurance Contributions (NICs) on employers’ payments into employees’ workplace pensions.

Mr Sunak said the Prime Minister had ‘opened the door’ to raising National Insurance on pensions. The Prime Minister refused to close it, merely stating what we have heard from him countless times over the past few weeks: namely, Labour had made an ‘absolute commitment in relation to not raising tax on working people’.

For the record, this commitment means Labour will not increase rates of income tax, National Insurance contributions for working people, and VAT. This gives him wiggle room to apply NICs to employers’ pension contributions.

For a government with big spending plans, applying this tax on employers seems like a no brainer. A report last month from pension consultant Lane Clark & Peacock (LCP) indicated that applying a 2 per cent NIC charge on employer pension contributions would reap £2billion a year in tax revenues.

Yet there would be resulting negative consequences. It would be yet another cost for businesses (especially small businesses) to meet – and on top of the costs of meeting the new (and crazy) Employment Rights Bill that Deputy Prime Minister Angela Rayner is intent on getting over the line.

As Craig Beaumont, executive director of the Federation of Small Businesses, said in the aftermath of PMQs: ‘Adding employer NICs to pension costs would be one way of shrinking small business employment even more in 2025 – the precise opposite of what we all want and need to see.’ Bang on the nail.

Workers may think that a NIC tax on employer pension contributions doesn’t concern them. Maybe not immediately, but it could impact them big time further down the line if, because of the tax, their employer decides to cut the contributions they pay into their pensions. This would mean smaller pension pots to take into retirement.

The tax could also result in employers axing jobs to cut costs. No job, no employer paying into your pension.

So, to recap, no change in tax relief on pension contributions on October 30. And a near certainty of a tax on employers’ pension contributions.

What we don’t know for sure is what the Chancellor has in mind with regards to the tax-free cash that we can take from our pension fund.

Currently, most savers can access 25 per cent of their pension pot tax-free once they reach age 55, up to a limit of £268,275. Yet, if everyone is reading the runes correctly, Ms Reeves seems keen to give the limit a ‘grade one’ haircut – maybe a shave down to £100,000. This, experts say, would also raise £2 billion a year in extra tax revenue.

The expected shave has already persuaded many people to access their tax-free cash ahead of the Budget. And unless Ms Reeves (or her leaky Treasury officials) come clean on her intentions, more will do so before October 30.

Clarity on this issue is essential. It is leading to some people making irrational decisions – for example, taking tax-free lump sums when they have no specific use for them or an available Individual Savings Account that they can pour it into to keep the money tax-free.

Of course, there are plenty of other things Ms Reeves could do to pensions in her Budget – for example, decrease the maximum amount that can be put into a pension per tax year (currently £60,000).

She could also blindside us by reintroducing the lifetime allowance on pension savings which, if exceeded, resulted in extra taxes on the surplus.

Jeremy Hunt, the previous Chancellor of the Exchequer, abolished the allowance. In opposition, Ms Reeves first said she would reintroduce it, with exceptions for certain key public sector workers such as doctors. She then did a spectacular U-turn by saying she wouldn’t bring it back after all.

Another U-turn is unlikely, but nothing can be ruled out with this Chancellor.

With the Institute for Fiscal Studies saying Labour must raise taxes by as much as £25billion to ensure the country does not plunge into an era of austerity, nothing can be ruled out. Our pensions are at risk like never before.

Things Can Only Get Worse.