Pension tax relief
Discussion
To be "changed" at least. Way too much Tory paper interest in this, a sure fire way to test the theory / outrage level before implementation...
https://www.telegraph.co.uk/politics/2018/10/07/pe...
Paywall, but you can read enough. Not even Osborne dared...
https://www.telegraph.co.uk/politics/2018/10/07/pe...
Paywall, but you can read enough. Not even Osborne dared...
Edited by Croutons on Monday 8th October 08:40
The Tories want to f
k over the younger generation again then??
As if they hadnt contributed enough to a feeling of resentment between the generations, why not look at the ridiculous triple lock for current pensioners who retired at 60, rather than punishing those of working age who have already accepted they will be working to over 70 but are trying to put some money away for themselves.
Having been Tory all my life, and, at 30, probably exactly the sort of voter they should be trying to encourage, I think next time I will vote Lib Dem...
k over the younger generation again then??As if they hadnt contributed enough to a feeling of resentment between the generations, why not look at the ridiculous triple lock for current pensioners who retired at 60, rather than punishing those of working age who have already accepted they will be working to over 70 but are trying to put some money away for themselves.
Having been Tory all my life, and, at 30, probably exactly the sort of voter they should be trying to encourage, I think next time I will vote Lib Dem...
Condi said:
The Tories want to fk over the younger generation again then??
Again?k over the younger generation again then??Condi said:
As if they hadnt contributed enough to a feeling of resentment between the generations, why not look at the ridiculous triple lock for current pensioners who retired at 60, rather than punishing those of working age who have already accepted they will be working to over 70 but are trying to put some money away for themselves.
Agreed, I thought this was being reviewed?Condi said:
Having been Tory all my life, and, at 30, probably exactly the sort of voter they should be trying to encourage, I think next time I will vote Lib Dem...
Good luck with that!Edited by sidicks on Monday 8th October 10:20
The removal of higher rate tax and the removal of the 25% PCLS are perennial topics prior to budgets and have been for the last, what 20 years or so?
I'm not saying it won't happen, but there's surely got to come a point when HMG, of any shade, needs to realise that reducing peoples trust in pensions means they're less likely to save for retirement leaving the tax payer to pick up the bill. Given all the recent changes and scandals, IFAs in South Wales I'm looking at you, surely now is not the time?
I'm not saying it won't happen, but there's surely got to come a point when HMG, of any shade, needs to realise that reducing peoples trust in pensions means they're less likely to save for retirement leaving the tax payer to pick up the bill. Given all the recent changes and scandals, IFAs in South Wales I'm looking at you, surely now is not the time?
I edited my original post to say it looks very much like it will be "changed".
The previous theories floated were:
40% relief to be done away with,
Quid pro quo to be 30% relief across the board, to encourage lower rate payers to save.
Then Osborne wimped it, and made most changes by stealth anyway (restricting higher rate relief, giving 25% bonuses on LISA's).
I dare say, the mediocrity Hammond shows will likely mean less capacity to hide blunt stupid decisions. I've met him >30 times when I say that.
The previous theories floated were:
40% relief to be done away with,
Quid pro quo to be 30% relief across the board, to encourage lower rate payers to save.
Then Osborne wimped it, and made most changes by stealth anyway (restricting higher rate relief, giving 25% bonuses on LISA's).
I dare say, the mediocrity Hammond shows will likely mean less capacity to hide blunt stupid decisions. I've met him >30 times when I say that.
Croutons said:
To be "changed" at least. Way too much Tory paper interest in this, a sure fire way to test the theory / outrage level before implementation...
https://www.telegraph.co.uk/politics/2018/10/07/pe...
Paywall, but you can read enough. Not even Osborne dared...
While I don't like this one bit, when you are putting a budget together, its a viable option to release funds to elsewhere. The current relief is very very generous, lets be honest, so its no surprise to see it being targeted.https://www.telegraph.co.uk/politics/2018/10/07/pe...
Paywall, but you can read enough. Not even Osborne dared...
Edited by Croutons on Monday 8th October 08:40
On the other hand, much like we seen with zero road tax cars - people change their habits and all of a sudden, the tax income you thought you would get doesn't appear. Far too many people actually bought zero road tax cars so they had to back pedal and change it again.
People will adapt their pension contributions if things change as they suddenly explore alternative means of putting money aside for the future - if the £40k annual allowance is dropped to £20k - people will most certainly change their habits - I don't think there can be any doubt about that. The 40% relief being reduced to 25% or 30% - that might actually work in generating extra income.
PurpleMoonlight said:
Removal of higher rate relief will just see w rush to salary sacrifice instead. It would also require payroll programming for gross deduction contributions.
The 25% tax free cash isn't going anywhere. Doing so would would be suicide for the party doing so.
Could you elaborate a little on the rush to salary sacrifice line, or advise a link I can work it out for myself from? Would like to know a little more on the difference.The 25% tax free cash isn't going anywhere. Doing so would would be suicide for the party doing so.
I currently pay into an employer pension scheme, deducted at source pre (high rate) tax etc. Having read this it sounds like you suggest there is another way should this come in.
Not looking for financial advice, just an explanation of the line - thanks!
Think about it as whether your pay and benefits is:
- salary of £20k, out of which you pay £1k pension contributions; or
- salary of £19k, and your employer pays £1k to your pension.
It should be the same thing in practice, but the second one ("salary sacrifice") currently benefits from relief on NI contributions as well as income tax.
So if the government stopped tax relief at marginal rates, higher paid employees would simply get their employers to pay the contributions on their behalf and still retain full marginal rate tax relief. Although most companies already do that because of the NI relief I mentioned.
Of course, the government would try and close that obvious loophole by taxing employer contributions as well. But that get's really tricky when you look at defined benefit schemes (i.e. how much employers are "paying" is very unclear). The Labour government tried to do this in the 2009 budget and it was a disaster which was dropped as soon as the Tories came in to power. It led to "cliff edges" where an extra £1 of pay could mean someone was hit for tens of thousands of extra tax. And a pay rise for long-servers could lead to a large increase in the pension value which the employee would then be taxed on.
- salary of £20k, out of which you pay £1k pension contributions; or
- salary of £19k, and your employer pays £1k to your pension.
It should be the same thing in practice, but the second one ("salary sacrifice") currently benefits from relief on NI contributions as well as income tax.
So if the government stopped tax relief at marginal rates, higher paid employees would simply get their employers to pay the contributions on their behalf and still retain full marginal rate tax relief. Although most companies already do that because of the NI relief I mentioned.
Of course, the government would try and close that obvious loophole by taxing employer contributions as well. But that get's really tricky when you look at defined benefit schemes (i.e. how much employers are "paying" is very unclear). The Labour government tried to do this in the 2009 budget and it was a disaster which was dropped as soon as the Tories came in to power. It led to "cliff edges" where an extra £1 of pay could mean someone was hit for tens of thousands of extra tax. And a pay rise for long-servers could lead to a large increase in the pension value which the employee would then be taxed on.
Second telegraph mention of the day gives cuts to pensions a 70% probability.
That's what the cons do now, fk focus groups, test it with the reaction from outraged of Tunbridge Wells, as that's your core voter, and you haven't yet worked out social media because you are, Mr Hammond, a multimillionaire dinosaur who couldn't give a fk about the outcome so long as it doesn't knacker your leadership ambitions, because you've worked out blandness is an attractive trait compared to the shag-someone-other-than-your-wife-ness of Boris...
https://www.telegraph.co.uk/money/consumer-affairs...
That's what the cons do now, f
k focus groups, test it with the reaction from outraged of Tunbridge Wells, as that's your core voter, and you haven't yet worked out social media because you are, Mr Hammond, a multimillionaire dinosaur who couldn't give a fk about the outcome so long as it doesn't knacker your leadership ambitions, because you've worked out blandness is an attractive trait compared to the shag-someone-other-than-your-wife-ness of Boris...https://www.telegraph.co.uk/money/consumer-affairs...
Croutons said:
I edited my original post to say it looks very much like it will be "changed".
The previous theories floated were:
40% relief to be done away with,
Quid pro quo to be 30% relief across the board, to encourage lower rate payers to save.
Then Osborne wimped it, and made most changes by stealth anyway (restricting higher rate relief, giving 25% bonuses on LISA's).
I dare say, the mediocrity Hammond shows will likely mean less capacity to hide blunt stupid decisions. I've met him >30 times when I say that.
So if you are a high rate tax payer it's taxed on the way into a pension, and taxed on the way out (+ all the normal restrictions). The previous theories floated were:
40% relief to be done away with,
Quid pro quo to be 30% relief across the board, to encourage lower rate payers to save.
Then Osborne wimped it, and made most changes by stealth anyway (restricting higher rate relief, giving 25% bonuses on LISA's).
I dare say, the mediocrity Hammond shows will likely mean less capacity to hide blunt stupid decisions. I've met him >30 times when I say that.
You would be better off putting it into an ISA and having total control.
Zigster said:
Think about it as whether your pay and benefits is:
- salary of £20k, out of which you pay £1k pension contributions; or
- salary of £19k, and your employer pays £1k to your pension.
It should be the same thing in practice, but the second one ("salary sacrifice") currently benefits from relief on NI contributions as well as income tax.
So if the government stopped tax relief at marginal rates, higher paid employees would simply get their employers to pay the contributions on their behalf and still retain full marginal rate tax relief. Although most companies already do that because of the NI relief I mentioned.
Of course, the government would try and close that obvious loophole by taxing employer contributions as well. But that get's really tricky when you look at defined benefit schemes (i.e. how much employers are "paying" is very unclear). The Labour government tried to do this in the 2009 budget and it was a disaster which was dropped as soon as the Tories came in to power. It led to "cliff edges" where an extra £1 of pay could mean someone was hit for tens of thousands of extra tax. And a pay rise for long-servers could lead to a large increase in the pension value which the employee would then be taxed on.
Thanks for the explanation, it is as I expected to be honest. I do indeed already contribute to my pension (payroll deduction) as salary sacrifice. - salary of £20k, out of which you pay £1k pension contributions; or
- salary of £19k, and your employer pays £1k to your pension.
It should be the same thing in practice, but the second one ("salary sacrifice") currently benefits from relief on NI contributions as well as income tax.
So if the government stopped tax relief at marginal rates, higher paid employees would simply get their employers to pay the contributions on their behalf and still retain full marginal rate tax relief. Although most companies already do that because of the NI relief I mentioned.
Of course, the government would try and close that obvious loophole by taxing employer contributions as well. But that get's really tricky when you look at defined benefit schemes (i.e. how much employers are "paying" is very unclear). The Labour government tried to do this in the 2009 budget and it was a disaster which was dropped as soon as the Tories came in to power. It led to "cliff edges" where an extra £1 of pay could mean someone was hit for tens of thousands of extra tax. And a pay rise for long-servers could lead to a large increase in the pension value which the employee would then be taxed on.
Your last paragraph explains it nicely for me; I had assumed that it wouldn't be that easy to avoid by just signing up for salary sacrifice to be honest. I expected, when I read the article it would be a little harder to avoid any potential cut in this benefit. The query I had earlier was due to the 'matter of fact' statement that people will just salary sacrifice instead.
Interesting times because if the benefit does get cut I can imagine I will be looking for alternative ways to save and invest for the future - and I ain't that far up the food tree!!
Condi said:
Can you copy the article for those not registered with the Torygraph?
I'm not registered, both articles start with enough before it is covered. Deliberately so, as other news outlets will pick up on it, and the tory machine will want to see how far up the daily mail this goes, ie how much more important is it perceived to the readership than some nothing snogging another.ETA, half way up the page already.
https://www.dailymail.co.uk/news/article-6253551/H...
Apparently the most important thing is someone I've never heard of being dumped on twitter. Such is the quality of readership. Other blue supporters may be less forgiving, and I really hope they are.
Edited by Croutons on Monday 8th October 21:38
Cheib said:
There was an article in the FT a while ago about how much pensions tax relief costs the exchequer....I was staggered at how much it was! Question of “when not if” higher rate tax relief disappears.
So why haven't labour or tories done it already? Osbourne gave it serious thought a few years back but backed away.I'm not comfortable with relief being called a 'cost'. The tax is deferred until such time as the income is taken in retirement. The tax rate then could be higher, lower or the same.
I'm more uncomfortable with pension contributions being taxed on the way in and on the way out. You could end up being taxed more by saving for retirement - how can that be right?
I can't see Hammond doing anything other than further reducing the annual allowance.
Cheib said:
There was an article in the FT a while ago about how much pensions tax relief costs the exchequer....I was staggered at how much it was! Question of “when not if” higher rate tax relief disappears.
They tend to look at the tax relief now and ignore the tax being collected in the future.LeoSayer said:
Cheib said:
There was an article in the FT a while ago about how much pensions tax relief costs the exchequer....I was staggered at how much it was! Question of “when not if” higher rate tax relief disappears.
So why haven't labour or tories done it already? Osbourne gave it serious thought a few years back but backed away.The Tories have changed pensions tax relief massively....LTS cap, limit on the amount you can get tax relief on etc.
I haven't been able to contribute to my pension for 8 years......
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