George Osborne says he will abolish the ‘death tax’
Chancellor of the Exchequer, George Osborne, has launched one of those promises designed to grab headlines briefly: the abolition of the “death tax“. This is where, presently, when anyone over 75 dies, a 55% tax is charged on the person’s pension. Around 12 million people in Britain have some form of contributions with more than 300,000 retiring every year.
From now on, it will apply to pension funds at a ‘marginal’ rate of 20%, which will result in annual savings of around £180 million for thousands of British families.
The same is applied when somebody under the age of 75 dies, but if their pension pot is already in a drawdown account. Spouses and economically dependent children under 23 are at present free from the 55 % tax.
Soon however, when someone over 75 dies, all recipients will only need to pay their marginal income tax rate. They also have the right to the pension funds regardless of age, with no constraint on the amounts of funds withdrawn.
Osborne’s announcement, on the second day of the Conservative Party Conference in Birmingham, has served to temporarily divert attention from a string of defections from the Conservative Party, to the UK Independence Party (Ukip) of Nigel Farage.
“A vote for Ukip is a vote for Labour,” said Osborne, who has used his speech today to make an appeal to the “grey vote” and the conservative values of life.
“The abolition of the tax on pensions is not a campaign promise of the Conservative Party,” he stressed in Birmingham. “This is a move that will effectively now and in future benefit millions of savers, as well as their children and grandchildren.”
Osborne’s intervention has served only to divert temporarily the attention away from the recent defections. The news had set the tone at the start of the Conservative conference with the leaving of Ukip deputy Mark Reckless, a month after the departure of Douglas Carswell.
The two escapees directly blamed David Cameron of betraying conservative values and were in favour of leaving the EU amid drastic means for tackling immigration.
Regarding Osborne’s intervention at the conference, the Chancellor boasted that “the British economy is growing faster than in other Western countries.” However, Osborne said that the fight against the deficit will remain a priority and announced a freeze on social benefits (except pensions and aid for losses) until 2006 to save the equivalent of £3.6 billion of the budget.
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