Tax relief on pensions reduced
Discussion
Fittster said:
F i F said:
Only jaglover and tonker on this thread have picked up on the real hit, which was done in the dying days of New Labour but carried on by Lib-cons. It's a classic piece of political spin, announcing it in such a way that Joe Public will think as so many on here have done, "Oh it's just for some few rich gits" when in reality it will hit people hard who are by no means wealthy. Middle squeezed again.
It concerns the different way that tax bills will have to be paid on pension benefits before they are received and people’s ability to top-up their savings with redundancy lump sums in the year of their retirement will be restricted.
More detail here New pension tax means HMRC will get most of some pay rises
and here Middle classes hit again with tax raid on pensions
The trouble is normal people (e.g. Not Eric) can't make sense of the following:It concerns the different way that tax bills will have to be paid on pension benefits before they are received and people’s ability to top-up their savings with redundancy lump sums in the year of their retirement will be restricted.
More detail here New pension tax means HMRC will get most of some pay rises
and here Middle classes hit again with tax raid on pensions
"Andrew Cawley, head of pensions at accountants KPMG, explained: “Take, for example, someone who has been a member of a final salary scheme for 25 years, earning £50,000 a year, who is promoted with a pay rise to £60,000.
“His accrued pension at the start of the year is 25 sixtieths of £50,000 or £20,833. But his accrued pension at the end of the year is 26 sixtieths of £60,000 or £26,000.
“He has therefore increased the value of his pension by £5,167 times 15 or £77,505. This is more than the annual allowance, so he will suffer tax at 40 per cent on £37,505 or £15,002. So his tax charge will exceed his gross salary increase.”
Clearly, the public sector is facing a massive task in reducing it's FS costs, but there seems to be an implicit understanding that FS agreements negotiated in the private sector could be equally as damaging to the economy in the long term.
deadslow said:
Andy Zarse said:
I'm surprised by the socialist and envious approach of the Tory government.
EFASocialism is the new conservatism?
This is all PR. Be seen to be hitting the scum wealthy because what they actually have no choice in doing is only just around the corner and it's going to seriously hurt. they have to have these memories to fall back on when the vice really turns on the common man.
Most of what they are doing impacts on very few but is unwinding G Brown's wheezes for buying the super wealthy.
Andy Zarse said:
Fittster said:
The trouble is normal people (e.g. Not Eric) can't make sense of the following:
"Andrew Cawley, head of pensions at accountants KPMG, explained: “Take, for example, someone who has been a member of a final salary scheme for 25 years, earning £50,000 a year, who is promoted with a pay rise to £60,000.
“His accrued pension at the start of the year is 25 sixtieths of £50,000 or £20,833. But his accrued pension at the end of the year is 26 sixtieths of £60,000 or £26,000.
“He has therefore increased the value of his pension by £5,167 times 15 or £77,505. This is more than the annual allowance, so he will suffer tax at 40 per cent on £37,505 or £15,002. So his tax charge will exceed his gross salary increase.”
Surely that's just basic maths? An eleven year old could understand it! "Andrew Cawley, head of pensions at accountants KPMG, explained: “Take, for example, someone who has been a member of a final salary scheme for 25 years, earning £50,000 a year, who is promoted with a pay rise to £60,000.
“His accrued pension at the start of the year is 25 sixtieths of £50,000 or £20,833. But his accrued pension at the end of the year is 26 sixtieths of £60,000 or £26,000.
“He has therefore increased the value of his pension by £5,167 times 15 or £77,505. This is more than the annual allowance, so he will suffer tax at 40 per cent on £37,505 or £15,002. So his tax charge will exceed his gross salary increase.”
Ahem!It would be interesting to see how this affects MPs suddenly being promoted to Minister... and then what happens when they get sacked and revert to a lower MP's salary?
SplatSpeed said:
i never trusted GB with my pension money
i am really glad now i did not
Why though? You could have been whacking in over £200k a year for ages meaning that this restriction down to £50 has less of an impact.i am really glad now i did not
What would be interesting would be if they capped the max annual payout for civil servants and index linked it going forward. That way people at the bottom could be given a little more.
Edited by DonkeyApple on Thursday 14th October 14:28
Jinx said:
Andy Zarse said:
Fittster said:
The trouble is normal people (e.g. Not Eric) can't make sense of the following:
"Andrew Cawley, head of pensions at accountants KPMG, explained: “Take, for example, someone who has been a member of a final salary scheme for 25 years, earning £50,000 a year, who is promoted with a pay rise to £60,000.
“His accrued pension at the start of the year is 25 sixtieths of £50,000 or £20,833. But his accrued pension at the end of the year is 26 sixtieths of £60,000 or £26,000.
“He has therefore increased the value of his pension by £5,167 times 15 or £77,505. This is more than the annual allowance, so he will suffer tax at 40 per cent on £37,505 or £15,002. So his tax charge will exceed his gross salary increase.”
Surely that's just basic maths? An eleven year old could understand it! "Andrew Cawley, head of pensions at accountants KPMG, explained: “Take, for example, someone who has been a member of a final salary scheme for 25 years, earning £50,000 a year, who is promoted with a pay rise to £60,000.
“His accrued pension at the start of the year is 25 sixtieths of £50,000 or £20,833. But his accrued pension at the end of the year is 26 sixtieths of £60,000 or £26,000.
“He has therefore increased the value of his pension by £5,167 times 15 or £77,505. This is more than the annual allowance, so he will suffer tax at 40 per cent on £37,505 or £15,002. So his tax charge will exceed his gross salary increase.”
Ahem!It would be interesting to see how this affects MPs suddenly being promoted to Minister... and then what happens when they get sacked and revert to a lower MP's salary?
No, it's aimed squarely at you and me brother.
anonymous said:
[redacted]
Not necessarily - Has been discusseed many times, but a pension is just a wrapper that doesn't cost anything, apart from a lack of liquidity!You get tax relief on contributions and growth is tax free (although you can no longer reclaim tax already paid on dividends - thanks Gordon!). When you take an annuity you are taxed as income, but for many people this will then be at the basic rate rather than the higher rate relief received on premiums.
Now if the structure you use to access the pension vehicle is inefficeint and expensive then this might mot be good value for money, but a 'pension' certainly is!
Sidicks
Andy Zarse said:
Fittster said:
F i F said:
Only jaglover and tonker on this thread have picked up on the real hit, which was done in the dying days of New Labour but carried on by Lib-cons. It's a classic piece of political spin, announcing it in such a way that Joe Public will think as so many on here have done, "Oh it's just for some few rich gits" when in reality it will hit people hard who are by no means wealthy. Middle squeezed again.
It concerns the different way that tax bills will have to be paid on pension benefits before they are received and people’s ability to top-up their savings with redundancy lump sums in the year of their retirement will be restricted.
More detail here New pension tax means HMRC will get most of some pay rises
and here Middle classes hit again with tax raid on pensions
The trouble is normal people (e.g. Not Eric) can't make sense of the following:It concerns the different way that tax bills will have to be paid on pension benefits before they are received and people’s ability to top-up their savings with redundancy lump sums in the year of their retirement will be restricted.
More detail here New pension tax means HMRC will get most of some pay rises
and here Middle classes hit again with tax raid on pensions
"Andrew Cawley, head of pensions at accountants KPMG, explained: “Take, for example, someone who has been a member of a final salary scheme for 25 years, earning £50,000 a year, who is promoted with a pay rise to £60,000.
“His accrued pension at the start of the year is 25 sixtieths of £50,000 or £20,833. But his accrued pension at the end of the year is 26 sixtieths of £60,000 or £26,000.
“He has therefore increased the value of his pension by £5,167 times 15 or £77,505. This is more than the annual allowance, so he will suffer tax at 40 per cent on £37,505 or £15,002. So his tax charge will exceed his gross salary increase.”
Ahem!It would be interesting to see how this affects MPs suddenly being promoted to Minister... and then what happens when they get sacked and revert to a lower MP's salary?
Andy Zarse said:
Jinx said:
Andy Zarse said:
Fittster said:
The trouble is normal people (e.g. Not Eric) can't make sense of the following:
"Andrew Cawley, head of pensions at accountants KPMG, explained: “Take, for example, someone who has been a member of a final salary scheme for 25 years, earning £50,000 a year, who is promoted with a pay rise to £60,000.
“His accrued pension at the start of the year is 25 sixtieths of £50,000 or £20,833. But his accrued pension at the end of the year is 26 sixtieths of £60,000 or £26,000.
“He has therefore increased the value of his pension by £5,167 times 15 or £77,505. This is more than the annual allowance, so he will suffer tax at 40 per cent on £37,505 or £15,002. So his tax charge will exceed his gross salary increase.”
Surely that's just basic maths? An eleven year old could understand it! "Andrew Cawley, head of pensions at accountants KPMG, explained: “Take, for example, someone who has been a member of a final salary scheme for 25 years, earning £50,000 a year, who is promoted with a pay rise to £60,000.
“His accrued pension at the start of the year is 25 sixtieths of £50,000 or £20,833. But his accrued pension at the end of the year is 26 sixtieths of £60,000 or £26,000.
“He has therefore increased the value of his pension by £5,167 times 15 or £77,505. This is more than the annual allowance, so he will suffer tax at 40 per cent on £37,505 or £15,002. So his tax charge will exceed his gross salary increase.”
Ahem!It would be interesting to see how this affects MPs suddenly being promoted to Minister... and then what happens when they get sacked and revert to a lower MP's salary?
No, it's aimed squarely at you and me brother.
And contrary to popular belief expressed by jinx there is a siginificant proportion of people in private sector DB schemes. I forget the exact statistics of the % of schemes still running but closed to new entrants.
This link gives a reasonable analysis of the reasons why occupational DB private sector active members have dropped from 5.5 million to about 2.5.
http://www.opalliance.org.uk/decline.htm
anonymous said:
[redacted]
1) Given that we are talking about final salary pensions schemes, there is no necessity for a 'pension company' to be involved, although of course many pensions are 'bought out' with an insurer ('pensions company')2) Yes, the pensions fund (or insurance company, if relevent) would make a profit on someone if they die 'early'. Likewise they make a loss if someone else dies later than anticipated. Broadly it all averages out.
3) You can often choose a pension with a guaranteed period (and / or dependant's pension attached) but this will impact (reduce) the pension amount payable.
It's not 'unfair', it's jsut how the calculations work!
sidicks
Edited by sidicks on Thursday 14th October 15:18
anonymous said:
[redacted]
errrr not necessarily correct, does the scheme not have an expression of wish form?Thus it is quite possible for someone to write on their form "Battersea Dog's Home" and any monies would go to that or otherwise if the trustees had a very good reason to do otherwise.
eg let's say death in service benefits.
x * salary plus
return of contributions
but of course no dependants / partner so nobody to pay a widower's pension to, assuming one is allowed under scheme rules, or what she has written on expression of wish.
Devil in the detail frankly.
Of course anything else in the fund that would have paid her pension stays in the pot.
Thus you could have somebody who retires, and upon retirement elects not to commute anything into lump sum and elects to have everything paid to them, no widow's pension. They die after a month. That could be it, fund cops for the lot, and again it could be that if the scheme rules allow it then with death within a certain time after retirement then certain monies to be paid to their estate. It all depends frankly.
DonkeyApple said:
SplatSpeed said:
i never trusted GB with my pension money
i am really glad now i did not
Why though? You could have been whacking in over £200k a year for ages meaning that this restriction down to £50 has less of an impact.i am really glad now i did not
What would be interesting would be if they capped the max annual payout for civil servants and index linked it going forward. That way people at the bottom could be given a little more.
Edited by DonkeyApple on Thursday 14th October 14:28
you think that money is safe
windfall tax
SplatSpeed said:
DonkeyApple said:
SplatSpeed said:
i never trusted GB with my pension money
i am really glad now i did not
Why though? You could have been whacking in over £200k a year for ages meaning that this restriction down to £50 has less of an impact.i am really glad now i did not
What would be interesting would be if they capped the max annual payout for civil servants and index linked it going forward. That way people at the bottom could be given a little more.
Edited by DonkeyApple on Thursday 14th October 14:28
you think that money is safe
windfall tax
Fear of a windfall tax that may or may not arise and hasn't even been mooted is not a reason to not utilise your pension capabilities. That would be completely illogical.
Most people don't have a pension because they are spending the money they should be putting to one side for old age on cars and other wastes that time will inform them they can't afford.
Only AIDs victims had an excuse for not saving for old age, and even they are screwed now they are living much longer.
This will all catch up with the current mid generation in 20 or so years time. It will be a generation without wealth. The kids already have the joy of spending the rest of their lives supporting the baby boomers and it hasn't struck home that they will also be paying for their parents.
DonkeyApple said:
Most people don't have a pension because they are spending the money they should be putting to one side for old age on cars and other wastes that time will inform them they can't afford.
Other wastes such as: rent, food, gas, electricity, water, travel to and from work, council tax..... So what should I not pay now to save for an old age? Do you think the local council will understand if I say "Sorry I'm not paying council tax as instead of funding your pensions I would like to fund my own?" ...
anonymous said:
[redacted]
Wish I could get a return like that. Got to assume you've missed some figures out there.Anyone know if there are any tables out there that give some idea of what your pension pot will (likely) provide, come retirement age? Having only started a pension 3 years ago, I've been making up for lost time, and have been lucky enough to have made good use of the allowance for the last three years. I was hoping to carry on for a couple more years before retiring early, but that now looks out of the question.
As company contributions, these sums also reduce corporation tax, so 'they' win both ways. Increased take from the tax payer or increased CT from the company's retained profits.
Will be interesting to see if there are any exceptions for those funding their own schemes with cash!?
Better to just have a lifetime limit IMO. Forget annual caps etc.
Someone who gets a minimum wage and comes into some cash should be allowed to put large lumps in without limit.
That would be much more simple and fair.
Better to just have a lifetime limit IMO. Forget annual caps etc.
Someone who gets a minimum wage and comes into some cash should be allowed to put large lumps in without limit.
That would be much more simple and fair.
AdeTuono said:
ringram said:
Better to just have a lifetime limit IMO.
There is. Now £1.5m, down from £1.8m. That's 30 years worth of £50k's.They are putting in an annual cap at 20% of the old as well. Thats not fair IMO.
Especially to those who dont earn as much until later in life..
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