Yesterday I wrote about how the main tax raising measure in Budget 2014 was a swizz. That it was an exercising in fiddling with the profile of tax receipts to enable Treasury to spend tomorrow’s receipts today. Yesterday’s swizz was a £4bn swizz. Today’s is a little less. But only a little.
You were probably bored by the pension annuity debate before it even started. It obediently casts a patronising left against a laissez faire right. But on its resolution hangs a yield to Treasury of a further £3bn (over the five year term for which they publicly forecast).
If you retire today with a 25 year life expectancy and a pension pot of 100 which you spend on an annuity the Treasury will have to wait a quarter of a century to take all its income tax rake from your 100.
If, on the other hand, you withdraw that 100 today, you accelerate the rake (moving it from years one-twenty five to year one) and you concentrate it in a single year meaning more of it will be taxed at your higher (marginal) rate of tax.
So the Tories want you to buy a Lamborghini. Because when you do, you generate an extra £3bn of revenue for the Treasury.
Of course, if you take your pot in year one, there won’t be any tax receipts in years two to twenty five. And we’ll already have spent the proceeds on beer and bingo. But why should we worry about that?