Sunak to extend freeze on ‘hated’ 55pc pension tax for two years

A complex and hated pensions tax that forces around two millions to hand over a staggering 55 percent of their retirement savings to HM Revenue & Customs. Now it is to become even more costly as it becomes a Treasury target once again.Sunak and Hunt are desperately hunting around for ways to save money and shrink the £50billion black hole in our nation’s finances.Hunt will set out their measures in his upcoming full autumn statement, and taxpayers should brace themselves for brutal assault.Options include suspending the state pension triple lock for the second time, extending the freeze on income tax thresholds, or increasing both capital gains tax and dividend tax.Now it seems that our workplace and personal pension savings are being dragged into the firing line as well.Sunak is set to mastermind yet another stealth tax raid. He is calculating that it will cause little protest because it is targeted at the better off.Yes those who pay will be hit hard. Prime Minister Rishi Sunak has already frozen the pensions lifetime allowance once (Image: Getty)The pensions lifetime allowance, or LTA, caps the maximum you can save across all your company and personal pension schemes during your lifetime at an arbitrary level.More than 1.6million had already been caught by 2016 and the number will rise every year because Sunak froze the level at which it kicks in last year, in his March Budget.Now he and Hunt are coming back for more, and the number of savers who fall victim could soon race past two million.Under the LTA, those whose total pension pots exceed an arbitrary sum pay an incredible 55 percent tax on the excess to HM Revenue & Customs.The lifetime allowance stood at a whopping £1.8 million a decade ago, so only the very rich had to worry about it.It has been repeatedly slashed to today’s level of £1,073,100.Then last year, Sunak then froze it at that level until at least the 2025/26 tax year.Now he looks set to extend that freeze for another two years, according to a report in The Daily Telegraph.READ MORE: UK’s most hated taxes to rocket as Sunak unleashes new fiscal blitz -Andrew Tully, technical director at Canada Life, said constant tinkering with the lifetime allowance means it is no longer something that only the wealthy need worry about.As the allowance has been slashed repeatedly and now frozen, more will get caught through the process of fiscal drag.This happens where inflation increases the value of incomes, savings and other assets, but the threshold at which we pay tax on them stay the same. “More and more are being dragged into HMRC’s net every year and this will worsen if Sunak and Hunt target the LTA again on November 17.’Tully said the LTA is so complex that it is almost impossible to understand.Planning your pensions to minimise your exposure is too complicated, because a sudden surge in the stock market could tip you over the allowance unexpectedly, triggering that 55 percent charge.”It’s a nightmare to navigate and puts people off saving,” Tully said.DON’T MISS:Winter energy bills to plunge as ‘world’s best country’ races to UK… [INSIGHT]The impact of high inflation on the lifetime allowance [GUIDE]Stealth raid on pensions to cost cash-strapped British workers £6BN [WARNING] Rishi Sunak pointed the way forwards by freezing the LTA last year and Jeremy Hunt will follow (Image: Getty)Many NHS doctors have been caught out, with some deciding to retire rather than pay this punitive tax.Other victims include those who have built up a large pot of company and workplace retirement savings.The lifetime allowance punishes savers who have done the right thing and built large sums for their retirement.Some could pay £165,000 to HMRC as a result of the original LTA freeze.Extending the freeze for another two years, until the end of the 2027/28 tax year, will only draw out the agony.While ordinary pension savers will be nowhere near the LTA and may think the better off should pay more, this is a bad way to do it.The pensions lifetime allowance is badly planned and needs reform.Instead, it is going to carry on for longer in its present confusing state.