Pensioners and savers in tax-raid firing line

ACHEL Reeves faces an ever-deepening hole in the public finances, with an estimated shortfall of up to £50billion, ahead of her second Budget on November 26. With sluggish growth and mounting borrowing, there is no easy way to balance the books, unless the Chancellor breaks her "ironclad" fiscal rules.

- By Harvey Jones

Slashing spending would trigger a backbench rebellion, which puts taxpayers in the firing line.

Many of the likely tax rises could hit pensioners and savers hardest, a poor reward for a lifetime of prudence and hard work.

PENSIONS

For millions of retirees, their pension is their financial lifeline. It's also a juicy target for the Treasury.

One option could see higher-rate 45% and 40% tax relief axed on contributions, replaced with a flat 25% rate. This would help basic-rate taxpayers and raise at least £10billion. Many fear she could attack the 25% tax-free lump sum, cutting the maximum from £268,275 to £100,000. That would hit anyone with more than £400,000 in their pension and raise £2billion.

Reeves could also trim the annual allowance on pension payments from £60,000 to £40,000, saving around £300million. Until details of the Budget land, savers will remain uneasy but should resist panic moves.

STATE PENSION

The state pension costs more than £150billion a year and makes another tempting target, Selby said.

"There are two ways to reduce state pension spending, ditching the triple lock or accelerating increases in the pension age." Both would come with a hefty political price, particularly after the backlash over her winter fuel payment raid.