The ownership of pensions

by Ed Bowsher on 15 June 2009  |  2 comments
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Pension savers should only be taxed once on their pension.

This is a great post on Steve Bee's BeeHive blog.

Here's the money quote:

'There should be no chance whatsoever that someone could be taxed twice on money put aside for the future. When we defer income we defer the day we pay tax on that income; that's what pensions are all about. We don't know what the tax rates will be in the far future when we choose today to defer income; we're taking a leap of faith that tax rates won't be astronomically high and hope that if enough of use defer our income in this way that in itself will help keep tax rates low in future.'

Steve is right. I fear that politicians will look for ways to double tax pensions. In fact, you could say that they've already done so for people who earn more than £150,000 a year.

Double taxation an interesting point to bear in mind if you're wondering whether to save for your retirement via a conventional pension or via an ISA. If you think that tax rates are likely to be higher when you retire, there's an argument for saying you should save in an ISA where you're paying the tax now instead of in your old age.