UK Budget robs lower paid taxpayers

A lot of people are quite rightly pointing out that the latest adjustments in the UK budget that came into effect this tax year are very damaging to the lower paid. The major point made by all is the loss of the 10% starting-rate, which was a great incentive to the lower paid.

I completely agree this was a disgrace, but what has escaped the eyes of most is the way that the drop in standard tax rate from 22% to 20% has also robbed savers who pay into pension schemes. Now, instead of receiving a 22% tax credit, you only receive a 20% tax credit. As if "Golden" Gordon Brown hadn't already done enough to destroy the virtue of saving for retirement.

I would say that if you are a standard rate taxpayer, there is now zero point in contributing to a pension scheme, since I bet that by the time you retire, ever more inventive ways such as "Golden Gordons" famous loss of the tax credit on dividends, will have been invented to siphon parts of your pension pot off, and that your pension will ultimately end up paying more than a 20% tax. Not to mention the atrocious annuity rates available and the loss of capital forever once you are forced to buy an annuity.

Note that the MPs can still claim a 40% tax credit back on payments into their own pension schemes. In fact, they can contribute up to 100% of their salary into a pension scheme and get 40% tax relief on the payments.

Definitely a case of protecting ones own self interest at the expense of the people who voted you in.