32% tax on savings interest?

Paul_Herring

zagfles wrote: »

But for most people who've paid into a workplace or private pension, they've already paid NI on that money because pension contributions generally don't get NI relief.

They do, for example - as already stated, if they're made from salary sacrifice. Some companies will also contribute the 'employer's NI' saved towards the fund.

zagfles

Paul_Herring wrote: »

They do, for example - as already stated, if they're made from salary sacrifice. Some companies will also contribute the 'employer's NI' saved towards the fund.

That's why I wrote "most". Salary sacrifice is a relatively recent thing, most employees who started paying into a workplace pension 20 years ago would not have had NI relief on their contributions, main exception being the few non-contributory pensions where the employer paid the lot.

Thrugelmir

StevieJ wrote: »

It is making it difficult for people to plan for retirement if the rules are arbitrarily changed on a whim.

The changes would be phased in over a number of years as part of a wider reform package.

lisyloo

I would imagine most already do that - I do certainly.

Jem - just for my education, can you put some of your money into a pension to get tax relief?
I believe even if you are older then you can do this and then take a 25% tax free lump sum straightaway (if old enough) and then drawdown, so it can work out well.
I believe the limits of what you can put into a pension are quite high.
Just wondering if I'm missing something (I probably am :-)

lisyloo

Those of us who need the income from our savings don't have as much choice.

I agree that you don't have the choice of investments where your money is completely tied up.
But you can free up money from many types of investments e.g. NSI savings certificates after 12 months, stocks & shares, gold, pension drawdown etc.
So I agree you don't have as much choice as someone willing to tie their money up, but there still are many choices available rather than just below inflation savings.

Paul_Herring

lisyloo wrote: »

I believe the limits of what you can put into a pension are quite high.

The upper limit for pension contributions that attract tax relief for 2011/12 is £50,000, presuming you earn that much (gross,) otherwise it's the higher of your gross pay or £3,600.

jem16

lisyloo wrote: »

Jem - just for my education, can you put some of your money into a pension to get tax relief?

I do as I am still working. I put all of my income that would attract higher rate tax into a pension. There really isn't any point in my putting more than that in as the 20% tax relief that I would gain would see me with extra income taxed at 20%.

I believe even if you are older then you can do this and then take a 25% tax free lump sum straightaway (if old enough) and then drawdown, so it can work out well.

If already retired it would be £3600 gross. Also once you take the felxible drawdown route you can no longer contribute even the £3600.

lisyloo

There really isn't any point in my putting more than that in as the 20% tax relief that I would gain would see me with extra income taxed at 20%.

Well there is the 25% tax free lump sum, although for that you do have to be willing to commit to tie up your money.

jem16

lisyloo wrote: »

Well there is the 25% tax free lump sum, although for that you do have to be willing to commit to tie up your money.

I think there comes a time when we have to not let the tax tail wag the dog.

lisyloo

I think there comes a time when we have to not let the tax tail wag the dog.

Good advice, but as a 40 %er like you then I've always been very keen to avoid it.
Most of the time the wrappers (ISA/pension) do not affect the underlying investments you can make.
But yes, good advice.
Thanks