Pension reform

deadparrot

so the new pension reforms to be announced today are -

Staff will pay in 4% of their salaries and employers 3%, with an extra 1% from the government in tax relief.

Forget about the Staff 4% and the employers 3% for a moment, this 1% from the government in tax relief .... is this in addidtion to current tax relief? I already get the equivalent of 2% tax relief (if I was a higher rate tax payer it would be 4%)

My current situation monthly contributions -

Me 8% £200
Government 2% £50
Employer 10% £250
total £500

so after these reforms, if I am to make the same total monthly contribution is this likely to change to

Me 9% £225
Government 1% £25
Employer 10% £250
total £500

ie is this just another stealth tax rise or is the 1% truly an additional payment? which would actually make my personal contribution drop?

Me 7% £175
Current tax relief 2% £50
New tax relief 1% £25
Employer 10% £250
total £500

james3333

your situtation looks very similar to mine and i too would be very interested in what exactly this means....
my company pays 8.7% of pensionable pay, could this be cut to the 3% suggested?
we've just had a big shift around and my company has opted to go into a CARE sheme, where my company pays into the pension on my behalf and i have a 'reduced wage', but i actually come out with more pm due to NI reductions.
anyone have any ideas about all this?

dunstonh

There is no tax relief on the NPSS. The Govts 1% replaces that.

There is a fear that companies that currently pay more into a pension will see this as a way to reduce their contributions. I personally dont see that happening apart from perhaps smaller companies with high staff turnover.

The NPSS currently has no mention of any lump sum benefit and pensions will continue to be available along side the NPSS. However, the stakeholder pension looks likely to be made obsolete at the same time.

Still early days and there were rumours that Gordon Brown doesnt like this NPSS and will kick it into touch if/when he takes over the reins.

whambamboo

dunstonh wrote:

There is no tax relief on the NPSS. The Govts 1% replaces that.

I assume there will still be CT relief for the employer?

deadparrot

could this be cut to the 3% suggested?

that is another worry, but considering employers can currently make no contributions, but many choose to do so, then I'd suggest that as long as employers compete for staff, "better than minimum" pension schemes will be offered.

If there is a recession, and the labour market swings in favour of employers, then less favourable pension schemes will be offered, but at least they will be forced to 3% rather than 0%

All speculation though, so not worth worrying about too much.

deadparrot

dunstonh wrote:

There is no tax relief on the NPSS. The Govts 1% replaces that.

I'll be £300/year worse off then, this must make pension schemes highly unfavourable (especially for higher rate tax payers) other than collecting the free money from your employer.

dunstonh

The Govt was still tinkering the A day pension rules a month before they were due to come in. NPSS is still over 5 years away and you can bet your life it will change between now and then and assuming it does survive, there will be last minute changes.

deadparrot

heh, OK

remind me to bump this thread in 5 years :-)

EdInvestor

The Govt was still tinkering the A day pension rules a month before they were due to come in.

It's still tinkering, 9 months after they came in.Indeed some A-day rules are likely to be completely revised.

At least they are getting the hang of pensions a bit better now. (IMHO;) )

Andy_L

deadparrot wrote:

I'll be £300/year worse off then, this must make pension schemes highly unfavourable (especially for higher rate tax payers) other than collecting the free money from your employer.

Why? - You'll just opt out & continue with the status quo

deadparrot

Won't employers join the scheme though? even though they may continue contributing more than 3% the NPSS scheme may still be attractive to employers in terms of admin overhead/scheme costs etc. Especially if stakeholder schemes, like my current scheme are scrapped?

If I can continue the status quo then great, I'm happy