MSE News: Pensions tax relief slashed to save £4 billion a year

Jacka87

I have to say their is a lot of people who always go on about final salary pension schemes and the people on them.

I am in my early 20s and very fortunate to get a job with a company about 20Months ago who still offered a final salary pension. This has now been stopped for new entrants. But my issue is that although this is a final salary scheme and a great benifit, most of my collegues from university are now earning more than me and have equivelent qualifications. I did not join my company because of the pension it was more of a geographical decision but the pension definetly helps make up for the fact that my mates are now earning more than me!

Btw one of my mates left uni with a lower classification of degree than me and basically all of my other mates, a 3rd! He is now earning 6k a year more than me (mostly due to the lifestyle he has had to adopt) and he doesnt pay a penny in tax! I admit he spends long periods of time away from home but the 6k extra plus the fact I am taxed aboyut another 4-5k means he is raking it in and yet nobody moans about how these offshore earners are not covering their tax so why do we all moan about final salary schemes!

Final salary schemes are a perfectly just way of arranging a pension scheme. Tho if they are in deficit everybody needs to pay more in, the employer and the employee! Btw mine is not tax payer funded so both myself and the employee have had to pay in year on year!

mitchaa

I take it someone earning £150k and putting £100k of that into a pension scheme as it stands gets 40% tax relief on that £100k?
As of next year, this person can still put the £100k into his pension fund, but only £50k of that will receive 40% relief, the remainder £50k being taxed at 40%?

Have I understood correctly? Surely some clever accountant will work their magic in order to get round this?

mitchaa

Jacka87 wrote: »

I have to say their is a lot of people who always go on about final salary pension schemes and the people on them.

I am in my early 20s and very fortunate to get a job with a company about 20Months ago who still offered a final salary pension. This has now been stopped for new entrants. But my issue is that although this is a final salary scheme and a great benifit, most of my collegues from university are now earning more than me and have equivelent qualifications. I did not join my company because of the pension it was more of a geographical decision but the pension definetly helps make up for the fact that my mates are now earning more than me!

Btw one of my mates left uni with a lower classification of degree than me and basically all of my other mates, a 3rd! He is now earning 6k a year more than me (mostly due to the lifestyle he has had to adopt) and he doesnt pay a penny in tax! I admit he spends long periods of time away from home but the 6k extra plus the fact I am taxed aboyut another 4-5k means he is raking it in and yet nobody moans about how these offshore earners are not covering their tax so why do we all moan about final salary schemes!

Final salary schemes are a perfectly just way of arranging a pension scheme. Tho if they are in deficit everybody needs to pay more in, the employer and the employee! Btw mine is not tax payer funded so both myself and the employee have had to pay in year on year!

Do you really believe that your FSP scheme will still be up and running in 40yrs time?

I was the same, joined the company I work for in 2007, started FSP, closed to new entrants in 2008 and then scrapped altogether in 2009.

You'll be very lucky to keep hold of your FSP.

jamesd

mitchaa, the other 50k would be more likely to be put into some other investment if it's not getting tax relief. Perhaps a VCT to get 30% tax relief and tax free income. That 30% is also available to basic rate tax payers. But the investments available in VCTs are quite limited and you have to hold them for at least five years or pay back the tax rebate when you sell.

dunstonh

Tho if they are in deficit everybody needs to pay more in, the employer and the employee!

Dont read too much into that. Every time the markets crash, the media makes a song and dance about how much deficit there is. However, when the markets go up, the deficit goes away. I believe that before the recession, the the bulk were in surplus.

This happens every growth/crash cycle.

nrsql

dunstonh wrote: »

Dont read too much into that. Every time the markets crash, the media makes a song and dance about how much deficit there is. However, when the markets go up, the deficit goes away. I believe that before the recession, the the bulk were in surplus.

This happens every growth/crash cycle.

Which is fine as long as a surplus isn't used as an excuse to ...

Jacka87

mitchaa wrote: »

Do you really believe that your FSP scheme will still be up and running in 40yrs time?

I was the same, joined the company I work for in 2007, started FSP, closed to new entrants in 2008 and then scrapped altogether in 2009.

You'll be very lucky to keep hold of your FSP.

To be honest NO! I do not believe it will be running in 40 yrs time. Tho if its running for the next 10 yrs then at least I will have aquired 10 yrs of it. To be honest I may not even be with the company that long either as I am only in my early career and trying to make my way up the career ladder. The point however is more concerned with the fact that employees of FS schemes get bashed for being tax thieves and I think that its a bit unfair when their is people like myself on fairly average salarys getting whacked with the same types of abuse as civil servants and MPs who may or may not have lovely GOld plated pensions!

Jacka87

dunstonh wrote: »

Dont read too much into that. Every time the markets crash, the media makes a song and dance about how much deficit there is. However, when the markets go up, the deficit goes away. I believe that before the recession, the the bulk were in surplus.

This happens every growth/crash cycle.

I am aware of that side of the deficit as well, and with that in mind do hold onto some minor hope that my FS pension will run strong right up to retirement in 40yrs! However I feel that as with many things nowadays, peopl ejust dont pack the cash into the acoount when the going is good, then use the deficit as an excuse to close what is perceived as an over costly scheme to run.

We shall all only know with time.

zygurat789

jamesd wrote: »

mitchaa, the other 50k would be more likely to be put into some other investment if it's not getting tax relief. Perhaps a VCT to get 30% tax relief and tax free income. That 30% is also available to basic rate tax payers. But the investments available in VCTs are quite limited and you have to hold them for at least five years or pay back the tax rebate when you sell.

5 years is quite a short space of time compared to a pension!
Ciouldn't you also buy £3600 pa worth of pension for a non-workin wife, or increase her contributions to 15% of salary? After all it is good advice, surely, to split retirement income between spouces?

gadgetmind

What happens for the 2009/2010 tax year as I went over that (retrospective!) £20k limit? And what about this tax year? Does all that special allowance complexity still apply? And can a payment over £50k in 2011/2012 be offset again paying less this year or in 2021/2013?

And no, I'm not on £250k pa, nothing even close. I just want to have a decent pension rather than relying on HMG.