Most people wont be affected by Chancellor George Osbornes move to slash the lifetime pensions allowance from 1.25m to 1m, so most people wont care.
Few people, me included, expect to have anywhere near that amount in their pension pot.
Which is one reason why the Chancellor thought this would be a good way of funding his fiscally neutral Budget.
The other reason was petty politics. Labours Ed Balls had planned to raid pensions in exactlythe same way, to fund a cut in tuition fees. He cant now.
So the move was good politics, but really bad policy if you understand the importance of encouraging people to save for their future.
First, it confirmsthat politicians viewthe nations pension savings as a pot they can raid whenever they need to fund a vote-grabbing policy. Remember Gordon Browns infamous 5bn a year pension tax raid?
This isnt Mr Osbornes first assault on the lifetime allowance either. It actually stood at 1.8m in 2011, he has cut it by a total of 40% since then.
He has also slashed the maximum you can save in a pension each year from 255,000 to 40,000, a massive 84% cut.
Why bother saving when the rules are changing all the time?
Tax On Success
Most of the people affected will be in public sector final salary schemes, notably senior doctors, policemen and civil servants.
But many will also be private investors putting money into a personal pension, possibly on top of workplace scheme.
And the crazy thing is that Mr Osborne isnt just hitting people who go to the trouble of investing for their future, he is punishing those who do it successfully.
The new 1m lifetime allowance isnt a cap on how much you can pay into a pension, but the total value of your pension including investment growth.
That means it doesnt hit everybody equally, it hits successful investors hardest of all.
Be The Worst You Can
The Motley Fool exists to encourage people to be the best investor they can. But the new reduced lifetime pension allowance does exactly the opposite.
Because the better you are, and the more your pot of money grows as a result, the closer you get to that lifetime cap.
And if you exceed it, you risk hefty tax charges on the surplus, which could be as high as 55%.
Limiting the amount you can investintoa pension and claim tax relief is fair enough. Setting a lid on how much your pension can actually grow is daft, because itturnsinvestment winners into losers.
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