Meet the new boss…why older people are finding the new Government too taxing

Part of my job involves talking to a lot of older people. This isn’t too taxing and many of them are my friends in any case. A number have commented on my last piece headed ‘we won’t get fooled again’ which looked at what the new Government might mean for older people.

They are telling me that they are unhappy with the Government’s stated enthusiasm to increase the rate of capital gains tax for personal assets. One person suggested that I might select as the theme for my next article another line from the same song - ‘meet the new boss, same as the old boss’. So I have.

For many pre-retirees and retired people, this proposed increase feels like a reversal of what might have been expected from a conservative majority. To conservative voters, it is seen a betrayal of basic principles. In fact, the plans are those of the LibDem minority, adopted by the coalition for reasons of political expediency. Meet the new boss, indeed.

There are a number of reasons why an increase in capital gains tax - from the current level of 18% to a straight 40%, with no taper relief, no indexation - would be very bad news indeed for many pre-retirees and retired people. The main reason is quite simple: their retirement plans depend upon the sale of property and financial assets they have accumulated during their working life. If the tax increase goes ahead, the tax to be paid on the sale of these assets would more than double, meaning that the net sum they would realise would decline by more than 25%.

If this is to be the case, then the Daily Telegraph and others may have a point in describing it as ‘daylight robbery’.

One explanation for this is that the politicians and public sector employees who devised it are insulated from the real world. We will not discuss here the scandalous abuse of taxpayers funds by politicians, although we should give a special mention to the Environment Minister (of all people) who only this week was apparently using a Government limousine to take her to her game of tennis. And we will not annoy ourselves by dwelling on the salaries, job security and protected pensions of the public sector.

For all of the people I have spoken to, capital gains are not the result of short-term speculation or tax avoidance schemes. They are the result of prudent long-term saving in order to fund retirement – much as the Government is likely to be encouraging us to do. The facts are these:
• The state cannot afford the burden of supporting the increasing number of people of retirement age. Initiatives by individuals to provide for themselves should be encouraged.
• Private pension schemes with a guaranteed salary-related pension are no longer the norm in the private sector.
• Working until retirement age is no longer the norm.
• Many people work for themselves and do not have private pension schemes.

Given all of this, it is not surprising that many people have chosen to save for their retirement through the purchase of shares and property. As has been repeatedly pointed out, the people affected are not a small minority of wealthy people, but a large proportion of the working population.

This agency does not have political affiliations, but we feel obliged to report the views expressed to us so forcibly by so many people. We are not alone. Dissent has included a sustained newspaper campaign, rumblings by backbench conservatives, and expert opinion that a tax increase would be counter-productive in economic terms.

All of this suggests that the Government’s plans are likely to be watered down. Let us hope so.

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