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Yahoo
10 hours ago
- Business
- Yahoo
The £70bn pension tax raid Reeves may not be able to resist
Rachel Reeves is eyeing up your pension. The Chancellor is struggling to balance the books, so where better to look than Gordon Brown's favourite cash cow? It is becoming increasingly likely that she will have to follow in the footsteps of the chancellor whose framed photo she kept as a student, by launching a raid on retirement pots this autumn. As Torsten Bell, the pensions minister, highlighted conspicuously last week, the Government offers tax relief worth £70bn every year to encourage workers to save. While he insisted that incentives to save were 'a good thing', Bell refused to rule out a raid in the future. But while pensions might be a tempting target, the risk of unintended consequences is high. By taking a slice of pension savings, Reeves could inadvertently discourage people from stashing money away or lead to lower pay for the very people that Labour promises to protect. Roughly £12.8bn of individual contributions were made to personal pensions in 2022-23. Data published by the taxman show that in 2022–23, the Government gave up £46.8bn it would have collected if pension contributions had been subject to income tax. That is in addition to £24bn it would have raised if employer pension contributions had been subject to National Insurance (NI) contributions. Another telling statement by Bell this week was that the Government wanted to ensure that people are not 'taxed twice' on the money they save for retirement. He said: 'What does the pension tax system do? It makes it easy for people to smooth their incomes over their lifetime. We're not taxing you twice. That is an important feature of most tax systems, and it will remain an important feature.' But that statement still leaves some low-hanging fruit for the Chancellor to pluck. The first is salary sacrifice, where staff agree to forego a portion of their salary in return for the same amount being ploughed into a workplace pension. As a result, employees can reduce their NI contributions and benefit from tax relief on the money they add to their pension. Employers, who already don't pay NI on an employee's pension contributions, can also reduce their tax bill further because the sacrifice serves as a pay cut. Pensioners do not pay NI, leaving scope for the Government to start taxing one side of this equation and still abide by this principle. HMRC estimates that it lost out on £3.9bn in NI receipts because of salary sacrifice schemes, which would be a princely sum for a cash-strapped Chancellor. In addition, employees currently benefit from roughly £6bn a year in income tax relief through salary sacrifice. 'A generous and opaque subsidy' The Institute for Fiscal Studies (IFS) has urged the Government to go further by moving towards levying NI on employer pension contributions as a principle. Carl Emmerson, the deputy director of the IFS, describes the absence of NI on employer pension contributions as 'a very generous and very opaque subsidy' that if removed entirely, could boost the Treasury's coffers by more than £17bn a year. However, with businesses still reeling from a £25bn NI raid on employers, this would be a politically toxic move, and one that Emmerson says will have consequences for working people. 'It would almost certainly put downward pressure on pay, and would also make government spending less generous because lots of public sector workers get generous employer pension contributions, and those public sector employers would find their national insurance bills going up,' he says. To ease pressures, Reeves could choose to reimburse public sector employers as she did during last autumn's raid. The Resolution Foundation has estimated that doing so would cost £5bn – though the measure would still raise £12bn. A more radical option would be to restrict the income tax relief that applies when a worker makes pension contributions at a flat rate of 30pc. This would benefit those on modest income, but at the expense of higher earners. Economists estimate the measure would affect up to 6m higher and additional rate taxpayers, costing the wealthiest savers about £2,600. HMRC estimates show that 37pc of income tax relief on total contributions is provided at the basic rate, just over half at the higher rate and 7pc at the top 45p rate. However, Sir Steve Webb, a former pensions minister, says the Treasury has shied away from this reform because of its hideous complexity, as well as the significant impact it would have on public sector workers and the implications for their gold-plated, final-salary pensions. Sir Steve says: 'The challenge for the Government with potential cuts to pension tax relief is that a significant part of the existing tax break goes to long-serving and senior public servants, typically in defined-benefit pension arrangements.' Any cut to higher rate relief or tax-free lump sums would affect many such workers adversely at a time when the Government already has issues with the public sector workforce over pay. As this group is part of Labour's core voting base, it is likely to be wary of alienating them further. 'Constant meddling' Baroness Altmann, another former pensions minister, warns that changes to pensions, including Reeves's decision to bring pension pots into the scope of inheritance tax, could leave many people without the means to support themselves later in retirement. 'The constant tax meddling has been a disaster for pensions,' she says. Altmann warns that private sector employees are likely to be left footing the bill for any further changes. 'We're already subsidising hugely generous public sector pensions that the private sector can almost never dream of,' she says. There is also another element of the pensions system that is currently tax-free on the way in and out: the amount that can be taken from pension pots. Tax-free lump sum Currently, people can take up to 25pc of any pension as a tax-free lump sum when they reach 55, up to a maximum of £286,275. Reducing the amount to £100,000 would affect about one in five retirees, and raise £2bn in the long run, according to the IFS. A similar proposal is being pushed by the Labour-affiliated Fabian Society, and it is understood that Treasury officials have urged previous chancellors to look at the relief, which costs about £5.5bn a year. Emmerson says: 'If you've already got £900,000 in your pension pot, it's not obvious why the taxpayer should be subsidising you to put more in your pension. These people can't really claim that they're under-saving for retirement.' However, he makes a more obvious point that should make Reeves think twice if she wants to raid workplace pension savings. 'This would almost exclusively be paid by workers,' he says. A Treasury spokesman said they were 'committed to keeping taxes for working people as low as possible'. However, it's now clear that they're going to go up. The question is by how much. Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Telegraph
13 hours ago
- Business
- Telegraph
The £70bn pension tax raid that Reeves be unable to resist
Rachel Reeves is eyeing up your pension. The Chancellor is struggling to balance the books, so where better to look than Gordon Brown's favourite cash cow? It is becoming increasingly likely that she will have to follow in the footsteps of the chancellor whose framed photo she kept as a student, by launching a raid on retirement pots this autumn. As Torsten Bell, the pensions minister, highlighted conspicuously last week, the Government offers tax relief worth £70bn every year to encourage workers to save. While he insisted that incentives to save were 'a good thing', Bell refused to rule out a raid in the future. But while pensions might be a tempting target, the risk of unintended consequences is high. By taking a slice of pension savings, Reeves could inadvertently discourage people from stashing money away or lead to lower pay for the very people that Labour promises to protect. Roughly £12.8bn of individual contributions were made to personal pensions in 2022-23. Data published by the taxman show that in 2022–23, the Government gave up £46.8bn it would have collected if pension contributions had been subject to income tax. That is in addition to £24bn it would have raised if employer pension contributions had been subject to National Insurance (NI) contributions. Another telling statement by Bell this week was that the Government wanted to ensure that people are not 'taxed twice' on the money they save for retirement. He said: 'What does the pension tax system do? It makes it easy for people to smooth their incomes over their lifetime. We're not taxing you twice. That is an important feature of most tax systems, and it will remain an important feature.' But that statement still leaves some low-hanging fruit for the Chancellor to pluck. The first is salary sacrifice, where staff agree to forego a portion of their salary in return for the same amount being ploughed into a workplace pension. As a result, employees can reduce their NI contributions and benefit from tax relief on the money they add to their pension. Employers, who already don't pay NI on an employee's pension contributions, can also reduce their tax bill further because the sacrifice serves as a pay cut. Pensioners do not pay NI, leaving scope for the Government to start taxing one side of this equation and still abide by this principle. HMRC estimates that it lost out on £3.9bn in NI receipts because of salary sacrifice schemes, which would be a princely sum for a cash-strapped Chancellor. In addition, employees currently benefit from roughly £6bn a year in income tax relief through salary sacrifice. 'A generous and opaque subsidy' The Institute for Fiscal Studies (IFS) has urged the Government to go further by moving towards levying NI on employer pension contributions as a principle. Carl Emmerson, the deputy director of the IFS, describes the absence of NI on employer pension contributions as 'a very generous and very opaque subsidy' that if removed entirely, could boost the Treasury's coffers by more than £17bn a year. However, with businesses still reeling from a £25bn NI raid on employers, this would be a politically toxic move, and one that Emmerson says will have consequences for working people. 'It would almost certainly put downward pressure on pay, and would also make government spending less generous because lots of public sector workers get generous employer pension contributions, and those public sector employers would find their national insurance bills going up,' he says. To ease pressures, Reeves could choose to reimburse public sector employers as she did during last autumn's raid. The Resolution Foundation has estimated that doing so would cost £5bn – though the measure would still raise £12bn. A more radical option would be to restrict the income tax relief that applies when a worker makes pension contributions at a flat rate of 30pc. This would benefit those on modest income, but at the expense of higher earners. Economists estimate the measure would affect up to 6m higher and additional rate taxpayers, costing the wealthiest savers about £2,600. HMRC estimates show that 37pc of income tax relief on total contributions is provided at the basic rate, just over half at the higher rate and 7pc at the top 45p rate. However, Sir Steve Webb, a former pensions minister, says the Treasury has shied away from this reform because of its hideous complexity, as well as the significant impact it would have on public sector workers and the implications for their gold-plated, final-salary pensions. Sir Steve says: 'The challenge for the Government with potential cuts to pension tax relief is that a significant part of the existing tax break goes to long-serving and senior public servants, typically in defined-benefit pension arrangements.' Any cut to higher rate relief or tax-free lump sums would affect many such workers adversely at a time when the Government already has issues with the public sector workforce over pay. As this group is part of Labour's core voting base, it is likely to be wary of alienating them further. 'Constant meddling' Baroness Altmann, another former pensions minister, warns that changes to pensions, including Reeves's decision to bring pension pots into the scope of inheritance tax, could leave many people without the means to support themselves later in retirement. 'The constant tax meddling has been a disaster for pensions,' she says. Altmann warns that private sector employees are likely to be left footing the bill for any further changes. 'We're already subsidising hugely generous public sector pensions that the private sector can almost never dream of,' she says. There is also another element of the pensions system that is currently tax-free on the way in and out: the amount that can be taken from pension pots. Tax-free lump sum Currently, people can take up to 25pc of any pension as a tax-free lump sum when they reach 55, up to a maximum of £286,275. Reducing the amount to £100,000 would affect about one in five retirees, and raise £2bn in the long run, according to the IFS. A similar proposal is being pushed by the Labour-affiliated Fabian Society, and it is understood that Treasury officials have urged previous chancellors to look at the relief, which costs about £5.5bn a year. Emmerson says: 'If you've already got £900,000 in your pension pot, it's not obvious why the taxpayer should be subsidising you to put more in your pension. These people can't really claim that they're under-saving for retirement.' However, he makes a more obvious point that should make Reeves think twice if she wants to raid workplace pension savings. 'This would almost exclusively be paid by workers,' he says. A Treasury spokesman said they were 'committed to keeping taxes for working people as low as possible'.
Times
19 hours ago
- Politics
- Times
Epping council votes to close controversial migrant hotel
The number of people protesting outside a migrant hotel in Essex on Thursday night was dwarfed by the number of police officers, who were deployed to head off the potential for the demonstration descending into violence. With many perhaps deterred by the bad weather, about 200 protesters gathered at the Bell Hotel in Epping, far fewer than the previous Thursday when there were estimated to be 1,000 people and clashes took place between protesters and police. They were met by a significant police presence that included dogs, territorial support units, which specialise in policing public order, and scores of officers who formed a human cordon around the hotel. Officers were also stationed all over the town and police vans snaked up the high street. • Neo-Nazis leading Epping hotel protests call for nationwide action The Bell has housed migrants since 2020, but protests were sparked after Hadush Kebatu, 38, an Ethiopian migrant and resident of the hotel, was charged with sexually assaulting a schoolgirl. They soon decided to march along the main road to the Epping Forest district council building, all the while flanked by a cordon of police officers. Inside the council building, a meeting was in session to vote on closing the Bell for housing asylum seekers. Shane Yerrell, a Tory councillor, read out a statement from the father of the girl who was allegedly assaulted by Kebatu. 'I do not want or condone any of the violence that has taken place at the protests,' he said. 'That's not what we're about, and that's not what we're trying to achieve. 'It's only going to make things go the other way. I just want the hotel to be moved … away from making any other family feel how we're feeling right now.' Outside, protesters milled around in the rain, occasionally raising chants of 'save our kids' or 'Starmer is a wanker'. There were scattered confrontations between individual protesters and police officers, including one man with a St George's flag draped over his shoulder, who took issue with an officer who asked him not to walk on the road. Callum Barker, a member of Homeland, a far-right party that has been helping to organise the protests, made a speech over a megaphone in which he berated police for having 'caged us like animals'. • Epping protest: Nigel Farage defends asylum hotel demonstrators When news came through that the council had voted to close the hotel, protesters greeted it with a round of cheers shortly afterwards followed by Winston Churchill's 'We shall fight them on the beaches' speech that was played over a loudspeaker. Earlier in the day Essex police had issued a dispersal order across Epping from 2pm on Thursday until 8am on Friday, giving officers the power to direct anyone suspected of committing antisocial behaviour, or planning to do so, to leave the area or face arrest. The decision to deploy large policing numbers comes amid mounting fear that the protests may escalate and spread to other parts of the country as they did during the race riots of last summer. • Nigel Farage denies whipping up trouble in Southport Last Thursday, the demonstration descended into violence as protesters brawled with police and smashed up their vehicles. Smaller demonstrations have also taken place in Canary Wharf and Diss over the past week. Chris Noble, the lead for protests at the NPCC, said all forces were ready and prepared after a detailed review of mistakes made during last summer's riots. 'We have robust and well-tested proactive plans in place, with the ability to mobilise significant and specialist resources, if necessary,' he said. 'Following last summer, we carried out a thorough review of national and regional processes, which has seen us take steps to further enhance our ability to respond in a timely and effective manner.' Police arrested 16 people involved in protests outside the hotel last week on Thursday and Sunday. Eight officers were injured and a number of police vehicles were damaged as missiles were thrown, Essex police said. Police released video showing the arrest of a man from Harlow in his living room on suspicion of violent disorder during one of the protests last week. Speaking to The Times, Shabana Mahmood, the justice secretary, warned violent thugs hijacking protests outside migrant hotels that she will 'always' ensure there is space in jail if they break the law before a series of demonstrations planned for this weekend. She said there was 'nothing wrong' with those staging peaceful protests outside hotels housing asylum seekers, such as the Bell Hotel in Epping. However, she said those who turn to violence during the protests will 'face the full force of the law'. Located on the boundary between London and Essex, Epping is an affluent market town popular with commuters working in the capital, and is a 40-minute journey on the Central Line of the Tube. On the high street are shops and cafés, such as Gail's Bakery and the chocolatier Thornton's, as well as two fine art galleries. Large mansions that sell for up to £10 million stand on the edge of town, complete with swimming pools and tennis courts. The average house price is about £620,000, according to the estate agent Elliott James. But there are also pockets of deprivation, and in 2020 parts of the town were rated as being within the top 10 per cent of the most unhealthy areas in the country. Epping Forest, the constituency in which the town of 12,000 is situated, has returned a Conservative member of parliament at every election since 1974 when the constituency was created. Some 63 per cent of voters opted to leave the EU in 2016. Immigration in the area has been below average. In 2021, 6.9 per cent of Epping Forest residents said they were not British, compared with 10 per cent across England, according to the Office for National Statistics. The area has long attracted far-right activity, with the British National Party winning a series of council seats in the 2000s. In 2010 the party won 4.3 per cent of the vote at the general election, compared with 1.9 per cent nationally. After the BNP collapsed, several members switched to For Britain, an anti-Muslim party. Julian Leppert, a former BNP councillor, won an Epping Forest district council seat for the party in 2019. When asked by a newspaper in 2020 whether he wanted a whites-only enclave in the area, he replied: 'Ideally, yeah.'
CTV News
a day ago
- Business
- CTV News
Aircraft maker Textron tops profit estimates on strong aftermarket service, Bell demand
A Textron Flight Systems drone Aerosonde MK 4.7G is displayed at the 50th Paris Air Show at Le Bourget airport, north of Paris, Thursday June 20, 2013. And in background the Predator B drone. (AP Photo/Remy de la Mauviniere) Aircraft maker Textron beat second-quarter profit and revenue estimates on Thursday, helped by strong demand for aftermarket parts and services and growth in its Bell unit. 'In the quarter, we saw revenue growth in both our commercial aircraft and helicopter businesses, as well as in Bell's FLRAA program, now known as the MV-75,' said Textron Chairman and CEO Scott C. Donnelly. Textron's larger aviation segment, which manufactures Cessna and Beechcraft aircraft, delivered 49 jets in the quarter, up from 42 in the second quarter last year. However, its quarterly deliveries of commercial turboprop were down to 34 from 44 last year. The segment's revenue rose 2.9 per cent from last year to US$1.52 billion, aided by higher aftermarket parts and services revenues in the second quarter. The company's Bell unit makes helicopters and tiltrotors, and has benefited from the Bell V-280 Valor program which the U.S. Army designates as the MV-75 future long-range assault aircraft. The unit posted a nearly 30 per cent rise in quarterly revenue to US$1.02 billion. Textron's total revenue rose more than five per cent to US$3.72 billion in the second quarter, compared with estimates of US$3.64 billion, according to LSEG compiled data. Its quarterly adjusted profit stood at US$1.55 per share, compared with the average of analysts' estimates of US$1.44 per share. Textron reiterated its expectation for full-year 2025 adjusted earnings to be in the range of US$6.00 to US$6.20 per share. The Providence, Rhode Island-based firm, however, sees a US$100 million hike in its annual adjusted manufacturing cash flow to be in the range of US$900 million to US$1.0 billion. This incorporates the expected impact associated with recently enacted U.S. tax legislation. --- Reporting by Aatreyee Dasgupta in Bengaluru; Editing by Leroy Leo
Globe and Mail
a day ago
- Business
- Globe and Mail
Textron Q2 Earnings Surpass Estimates, Revenues Improve Y/Y
Textron reported second-quarter 2025 adjusted earnings of $1.55 per share, which beat the Zacks Consensus Estimate of $1.45 by 6.9%. The bottom line also rose 0.6% from $1.54 in the year-ago quarter. The company reported GAAP earnings of $1.35 per share, which remained flat year over year. Growth in revenues and segmental profit was fully offset by elevated expenses, leading to flat year-over-year earnings. TXT's Revenues The company reported total revenues of $3.72 billion, which beat the Zacks Consensus Estimate of $3.63 billion by 2.4%. Moreover, revenues increased 5.4% from the year-ago quarter's level of $3.53 billion. Manufacturing revenues improved 5.3% year over year to $3.70 billion. Segmental Performance of Textron Textron Aviation: Revenues from this segment increased 2.8% year over year to $1.52 billion. This was primarily driven by higher aftermarket parts and services revenues, in addition to increased aircraft revenues. Textron Aviation generated an operating profit of $180 million compared with $195 million in the year-ago period. This deterioration can be attributed to the unfavorable mix of aircraft sold and higher warranty costs. The segment delivered 49 jets, up from 42 in the year-ago quarter. It also delivered 34 commercial turboprops, down from 44 in the second quarter of 2024. Order backlog at the end of the quarter totaled $7.85 billion. Bell: Revenues from this segment amounted to $1,016 million, up 28% from the year-ago quarter's registered number. This was driven by increased military revenues, primarily related to the U.S. Army's MV-75 program, as well as higher commercial revenues. The segment's profit dropped 2.4% to $80 million due to higher research and development costs. Bell delivered 32 commercial helicopters, flat year over year. Its order backlog at the end of the quarter totaled $6.9 billion. Textron Systems: This segment's revenues amounted to $321 million, down 0.6% from the year-ago quarter's registered number. Profits totaled $40 million, up 14.3% from the prior-year figure. The improvement was primarily driven by lower selling and administrative expenses. Textron Systems' backlog at the end of the quarter totaled $2.2 billion. Industrial: Revenues from this segment declined 8.2% to $839 million due to lower sales volumes. Lower revenues from the Textron Specialized Vehicles unit, owing to the disposition of the Powersports business, also affected this unit's top line. Moreover, the segment's profit totaled $54 million compared with $42 million in the prior-year quarter. The improvement can be partially attributed to the benefit of cost reductions from restructuring activities. Textron eAviation: Revenues from the segment totaled $8 million, lower than the prior-year period's revenues of $9 million. It reported a loss of $16 million, narrower than a loss of $18 million incurred in the prior-year period. Finance: This segment's revenues increased 25% to $15 million. Its profit totaled $8 million compared with $7 million in the year-ago period. Textron's Financials As of June 28, 2025, cash and cash equivalents totaled $1.35 billion compared with $1.39 billion as of Dec. 28, 2024. Cash generated from operating activities in the first six months of 2025 amounted to $281 million compared with $353 million in the year-ago period. Capital expenditures amounted to $134 million (as of June 28) compared with $140 million in the prior-year period. The long-term debt totaled $3.04 billion as of June 28, 2025, compared with $2.89 billion as of Dec. 28, 2024. TXT's Guidance Textron reiterated its 2025 adjusted earnings per share (EPS) outlook. The company still expects adjusted EPS to be in the range of $6.00-$6.20. The Zacks Consensus Estimate for earnings is pegged at $6.13 per share, which lies above the mid-point of its guided range. TXT's Zacks Rank Textron currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Recent Defense Releases Lockheed Martin CorporationLMT reported second-quarter 2025 adjusted earnings of $7.29 per share, which beat the Zacks Consensus Estimate of $6.49 by 12.3%. The bottom line increased 2.5% from the year-ago quarter's reported figure of $7.11. Net sales were $18.16 billion, which missed the Zacks Consensus Estimate of $18.56 billion by 2.2%. The top line, however, inched up 0.2% from $18.12 billion in the year-ago quarter. Northrop Grumman CorporationNOC reported second-quarter 2025 adjusted earnings of $7.11 per share, which beat the Zacks Consensus Estimate of $6.71 by 6%. NOC's total sales of $10.35 billion beat the Zacks Consensus Estimate of $10.06 billion by 2.9%. The top line also rose 1.3% from $10.22 billion reported in the year-ago quarter. RTX Corporation's RTX second-quarter 2025 adjusted EPS of $1.56 beat the Zacks Consensus Estimate of $1.45 by 7.6%. The bottom line also improved 10.6% from the year-ago quarter's level of $1.41 due to growth in adjusted operating profit. RTX's second-quarter sales totaled $21.58 billion, which surpassed the Zacks Consensus Estimate of $20.53 billion by 5.1%. The top line also surged a solid 9.4% from $19.72 billion recorded for the second quarter of 2024. 7 Best Stocks for the Next 30 Days Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops." Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.5% per year. So be sure to give these hand picked 7 your immediate attention. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report This article originally published on Zacks Investment Research ( Zacks Investment Research
