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

Slowly but surely we are starting to hear what the Minister of Finance has in store for our pensions during the budget on October 30.

Unfortunately, it does not 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 like things could only get worse instead of better on the pensions front.

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

What have we discovered so far? Well, leaks from Treasury sources earlier this week indicate that a radical reform of the tax credit on pension contributions is now on the back burner (she could revive the idea in a future budget if public 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 taxpayer, a higher taxpayer or an additional taxpayer, a fixed tax exemption percentage would be applied. So instead of a respective tax reduction of 20, 40 and 45 percent, the three groups of taxpayers would all receive the same rate – for example 30 percent. Great for basic rate taxpayers, but bad news for the ever-increasing higher rate and additional rate taxpayers.

You would think that Ms Reeves would have been thrilled to implement such radical pension reform. Egalitarian, socialist, very political, an effective tax on the ‘rich’.

But she backed off after being warned it would upset up to a million public sector workers who would have suffered the losses because they were higher taxpayers or had to pay an extra tax rate. When public sector unions bark, the Chancellor takes action.

Yesterday we learned a little more about pensions during Prime Minister’s Questions (PMQs). A well-informed and enthusiastic Rishi Sunak (still the opposition 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 has ‘opened the door’ to increasing National Pension Insurance. The Prime Minister refused to shut it down, merely stating what we have heard from him numerous times in recent weeks: namely that Labor has made an ‘absolute commitment to not increasing taxes on working people’.

Opposition Leader Rishi Sunak has taken Sir Keir Starmer to task at Prime Minister’s Questions, saying he had ‘opened the door’ to increasing National Insurance pension contributions.

The Prime Minister did not deny this, only stating that Labor had made an ‘absolute commitment to not increasing taxes on working people’.

For the record, this commitment means that Labor will not increase income tax rates, national insurance contributions for working people or VAT. This gives him leeway to apply NICs to employers’ pension contributions.

For a government with big spending plans, applying this tax to employers seems like a no-brainer. A report last month from pensions adviser Lane Clark & ​​Peacock (LCP) indicated that applying a 2 per cent NIC levy on employer pension contributions would raise £2 billion a year in tax revenue.

Yet there would be negative consequences. It would be yet another cost for businesses (especially small businesses) to comply with – on top of the cost of complying with the new (and crazy) employment rights law that Deputy Prime Minister Angela Rayner plans to overstep.

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

Employees may think that a NIC tax on employer pension contributions does not concern them. Perhaps not immediately, but it could have major consequences for them later if their employer decides to reduce the contributions they pay to their pension because of taxes. This would mean that smaller pension pots would have to be taken with them when one retires.

The tax could also lead employers to cut jobs to cut costs. No job, no employer who contributes to your pension.

In short, no change in the tax reduction on pension contributions on October 30. And a virtual certainty of a tax on employers’ pension contributions.

What we don’t know for sure is what the Chancellor has in mind regarding the tax-free money we can take from our pension fund.

Currently, most savers can access 25 percent of their pension pot tax-free once they reach the age of 55, up to a maximum of £268,275. But if everyone reads the runes correctly, Ms Reeves seems keen to give the limit a ‘first class’ haircut – perhaps a shave up to £100,000. Experts say this would also generate £2 billion a year in additional tax revenue.

The expected shave has already convinced many people to access their tax-free cash ahead of the budget. And unless Ms. Reeves (or her leaking Treasury Department officials) makes her intentions clear, more people will do so before October 30.

Clarity about this is essential. It leads some people to make irrational decisions – for example taking tax-free lump sums when they have no specific use for it, or an available individual savings account they can deposit it into to keep the money tax-free.

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

It could also blindside us by reintroducing the lifetime allowance on pension savings, which if exceeded would result in additional taxes on the surplus.

Jeremy Hunt, the former Chancellor of the Exchequer, has abolished the allowance. In opposition, Ms Reeves first said she would reintroduce it, with exceptions for certain key public sector workers such as doctors. Then she made a dramatic U-turn by saying she wasn’t going to bring it back after all.

A new turnaround is unlikely, but nothing can be ruled out with this Chancellor.

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

It can only get worse.