Hidden second state pension tax
Millions of workers will be hit by a stealth tax under the government's pension reform plans paying thousands of pounds a year for a benefit they will no longer receive, according to Conservative party MPs.
A White Paper on pension reform, due to be released tomorrow by Work and Pensions Secretary John Hutton, is expected to reveal plans to almost halve the second state pension income for middle-earners without a corresponding reduction in their national insurance contributions.
The changes would affect workers on more than £18,000 a year who will get a lower payout when they retire after years of paying more into the state pot.
"This amounts to another stealth tax on middle-income earners," said shadow work and pensions secretary Phil Hammond.
"At present, nearly half of employee NI contributions go towards an earnings-related second pension. But under the Government's proposals that contribution will become a straight tax on income."
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