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Could the government reverse Brown's tax on pensions?

There is a consensus that BTL was encouraged as an alternative investment vehicle to private pensions because of Gordon Brown's tax on them. Would reversing this tax encourage people to invest in the stock market again? Surely it would be better for the economy and for society not have so many pensions invested in a speculative asset that has been so destructive to the younger generation?
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Comments

  • nearlynew
    nearlynew Posts: 3,800 Forumite
    Do thieves tend to return what they have stolen from you?
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  • chewmylegoff
    chewmylegoff Posts: 11,469 Forumite
    Part of the Furniture 10,000 Posts Combo Breaker
    if you're talking about the rules on the dividend tax credit for pension funds, then it seems unlikely that the govt will want to make the deficit £5bn bigger by reversing brown's "raid on pensions".

    so no.
  • chewmylegoff
    chewmylegoff Posts: 11,469 Forumite
    Part of the Furniture 10,000 Posts Combo Breaker
    also i'm not sure that the consensus that you talk about actually exists, as i would say there are a number of other factors in play e.g. the availability of BTL finance, CGT rates, national psyche, and distrust of pensions (or more accurately pension fund managers) in the wake of high profile failures of pension schemes.
  • FTBFun
    FTBFun Posts: 4,273 Forumite
    Just to clarify there is no actual "tax on pensions". Rather the notional 10% tax credit on dividends (which isn't actually tax, but is rather to take into account corporation tax suffered by the company) was no longer repayable to the pension funds.

    I wouldn't say that pensions became worthless just because of this. If you have a pension to which your employer contributes that is effectively "free" money IMO.
  • CLAPTON
    CLAPTON Posts: 41,865 Forumite
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    edited 3 February 2012 at 3:31PM
    drc wrote: »
    There is a consensus that BTL was encouraged as an alternative investment vehicle to private pensions because of Gordon Brown's tax on them. Would reversing this tax encourage people to invest in the stock market again? Surely it would be better for the economy and for society not have so many pensions invested in a speculative asset that has been so destructive to the younger generation?


    massively more important for pension levels is the current policy of holding down interest and gilts rates that keep annunity rates very low.
    funded pension schemes are unfit for purpose as they are so much at the whims of the market and political influence
  • Andy_L
    Andy_L Posts: 13,075 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    Seeing as how the tax change was a continuation of a process started by Lamont and Major it seems unlikely they would
  • CLAPTON wrote: »
    massively more important for pension levels is the current policy of holding down interest and gilts rates that keep annunity rates very low.

    Well the discussion is about building up a decent pension pot, not about crystalising it, but low levels of annuity payments would be offset if people were able to build up larger, unraided pots. With larger pots come more options, such as drawdown.
    CLAPTON wrote: »
    funded pension schemes are unfit for purpose as they are so much at the whims of the market

    I think you mean 'Defined Contribution' schemes, not 'funded'. DC schemes are the ones invested in the stockmarket. You can have fully funded Defined Contribution (AKA Final Salary) schemes where the return is not at the whim of the market.

    DC schemes can be invested in a variety of investments which should include stockmarket shares and funds, but as a mixed portfolio that includes bonds, gilts, property and cash.
    CLAPTON wrote: »
    and political influence

    All pensions are subject to this, you have to make the decision whether the restrictions are less important than the tax rebates and any employer contributions.
  • CLAPTON
    CLAPTON Posts: 41,865 Forumite
    10,000 Posts Combo Breaker
    Well the discussion is about building up a decent pension pot, not about crystalising it, but low levels of annuity payments would be offset if people were able to build up larger, unraided pots. With larger pots come more options, such as drawdown.
    .

    I would suggest that pensioners are mainly concerned with the actual pension payout rather than the mechanisms for getting there


    I think you mean 'Defined Contribution' schemes, not 'funded'. DC schemes are the ones invested in the stockmarket. You can have fully funded Defined Contribution (AKA Final Salary) schemes where the return is not at the whim of the market.

    .

    yes indeed, thank you for correcting that

    DC schemes can be invested in a variety of investments which should include stockmarket shares and funds, but as a mixed portfolio that includes bonds, gilts, property and cash.

    .

    except for property, exactly my point


    All pensions are subject to this, you have to make the decision whether the restrictions are less important than the tax rebates and any employer contributions.


    maybe, but when did the government last reduce the state pension payout (think the three guarentees)

    strength in numbers with the state pension
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
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    Restrict relief to basic rate tax and cap pension contributions to say £30k.

    Then reinstating dividend tax credits would be fairer.
  • lvader
    lvader Posts: 2,579 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    Thrugelmir wrote: »
    Restrict relief to basic rate tax and cap pension contributions to say £30k.

    Then reinstating dividend tax credits would be fairer.

    Maybe but it would most likely result in less money being saved in pensions. Without the high rate tax relief I would most likely cut my contributions by 50%.
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