The Treasury’s softly-softly approach to slashing pension contribution relief is slowly but surely gaining ground.
Typically, if the Treasury has difficult to sell policy in mind, the first move is an attributable leak to the Sunday papers.
That happened last week.
Next comes a more formal leak that hints at a policy change without giving all the game away.
That happened this week.
The independent and fervently impartial House of Commons library research team have published a briefing document that typically is a forerunner of proposed legislation.
Testing the waters
The papers explain for MPs the three options for curtailing the relief that were supposed to slip into Budget 2016, but were dropped under a chorus of protests.
Now, Chancellor Phillip Hammond has put them back into the spotlight. The speculation is he will cut the relief to 20%, which halves the amount high earners can claim.
The leaks are about testing the political waters to see if the policy is now acceptable to voters. Although most of the press has published the details, the clamour not to implement the policy seems a lot quieter this time around.
Pension contribution relief is the tax top-up paid to pension savers by HM Revenue & Customs. For every £80 a basic rate taxpayer saves, the Treasury donates £20.
Higher rate taxpayers get an even better deal. For every £60 paid into a pension by a higher rate taxpayer, HMRC tops up the fund by £40. For additional rate taxpayers, the amount rises to £45.
Smart money on change
In the past year, the Treasury has paid out £5 billion in pension contribution relief.
Hammond is due to present his Autumn Budget 2017 on November 22.
A lot of smart money in and around Westminster suggests that he will cut top rate pension contribution relief in line with the basic rate then.
Some are predicting a flat rate of 25% rather than 20%.
Either way, the move would only impact a minority of higher-earning voters without triggering howls of protest, the Chancellor must be hoping.
However, freeing up £2 billion or so of much needed cash would be a welcome bonus for a cash-strapped Chancellor as well.
