Do You Think Income Tax Banding is Fair?

gorgeyetsun

Fella wrote: »

Only if you have no brain. You have no way of knowing what the tax treatment (or the lower or higher rates of income tax) will be by the time you reach retirement age. Who's to say you will be a lower-rate taxpayer when you're a pensioner anyway?


Furthermore there are massive restrictions on what you can do with your pension pot & most of it is going to have to go on an annuity which are already paying much much lower than they did even a few short years ago with no sign of that trend reversing.

As I said I have some pension funds but I prefer complete control over the majority of my investments.

Do you know anything about pensions? Have you any idea how large your pension pot would have to be in order to generate an income subject to higher rate tax? Especially after you have taken out your 25% tax free lump sum?

You're talking a million quid. Do you or anyone you know earn the sort of money that will allow you to build a pension pot that large? Do you believe that someone earning that sort of money would be relying on a pension to hide his money from the tax man?

Also, you don't have to buy an annuity anymore to fund your retirement and you have the same control over your investments within a SIPP as you do in an ISA - both have exactly the same funds, shares, gilts and bonds available. They are just different tax wrappers.

ukcarper

Personally when the 80% percentile for UK is about £37k and median is £22k or about £42k and £24k in south east I think there will be a lot of people who think £42k is a good salary.

Lokolo

ukcarper wrote: »

Personally when the 80% percentile for UK is about £37k and median is £22k or about £42k and £24k in south east I think there will be a lot of people who think £42k is a good salary.

That's because it is

michaels

gorgeyetsun wrote: »

Do you know anything about pensions? Have you any idea how large your pension pot would have to be in order to generate an income subject to higher rate tax? Especially after you have taken out your 25% tax free lump sum?

You're talking a million quid. Do you or anyone you know earn the sort of money that will allow you to build a pension pot that large? Do you believe that someone earning that sort of money would be relying on a pension to hide his money from the tax man?

I dunno, factor in 26 (or could it be 30, who knows what the retirment age will be when, should that be if, I ever get there) years of inflation and no indexation of the higher rate threshold (when was the last time it was increased with inflation let alone average wages?) and you are looking a a nominal £1m not being very much money at all...

gorgeyetsun

michaels wrote: »

I dunno, factor in 26 (or could it be 30, who knows what the retirment age will be when, should that be if, I ever get there) years of inflation and no indexation of the higher rate threshold (when was the last time it was increased with inflation let alone average wages?) and you are looking a a nominal £1m not being very much money at all...

We're talking about £1M in today's money. To put this into perspective, the average UK pension pot at retirement age is currently around £150k.

grizzly1911

Fella wrote: »

Only if you have no brain. You have no way of knowing what the tax treatment (or the lower or higher rates of income tax) will be by the time you reach retirement age. Who's to say you will be a lower-rate taxpayer when you're a pensioner anyway?


Furthermore there are massive restrictions on what you can do with your pension pot & most of it is going to have to go on an annuity which are already paying much much lower than they did even a few short years ago with no sign of that trend reversing.

As I said I have some pension funds but I prefer complete control over the majority of my investments.

You will not win, Renoman




is always right on this subject;)

I concur with you that pensions are only part of an investment plan.

gorgeyetsun

grizzly1911 wrote: »

You will not win, Renoman is always right on this subject;)

I concur with you that pensions are only part of an investment plan.

Isn't Reno a gambling city in the US? Not sure how it's appropriate here?

Pensions are definitely not a gamble for higher rate taxpayers. For every £60 you pay in, the government makes it up to £100 immediately with a tax rebate. When you retire and take your pension, for every £100 of taxed pension income, you pay £20 in tax.

It's not magic, nor is it rocket science. It's pretty straightforward really, hence my confusion you don't get it?

grizzly1911

gorgeyetsun wrote: »

Isn't Reno a gambling city in the US? Not sure how it's appropriate here?

Pensions are definitely not a gamble for higher rate taxpayers. For every £60 you pay in, the government makes it up to £100 immediately with a tax rebate. When you retire and take your pension, for every £100 of taxed pension income, you pay £20 in tax.

It's not magic, nor is it rocket science. It's pretty straightforward really, hence my confusion you don't get it?

We get it don't worry.

Curious why you have lost the signature.

I always think of My Hero when in discourse with your good self, don't know why.

gorgeyetsun

grizzly1911 wrote: »

We get it don't worry.

Curious why you have lost the signature.

I always think of My Hero when in discourse with your good self, don't know why.

Why not stay on topic and try and debate the issue?

Struggling and trying to deflect with a bit of trolling?

Fella

gorgeyetsun wrote: »

Do you know anything about pensions? Have you any idea how large your pension pot would have to be in order to generate an income subject to higher rate tax? Especially after you have taken out your 25% tax free lump sum?

You're talking a million quid. Do you or anyone you know earn the sort of money that will allow you to build a pension pot that large? Do you believe that someone earning that sort of money would be relying on a pension to hide his money from the tax man?

Also, you don't have to buy an annuity anymore to fund your retirement and you have the same control over your investments within a SIPP as you do in an ISA - both have exactly the same funds, shares, gilts and bonds available. They are just different tax wrappers.

I do actually know quite a few people aiming to build a pension pot that size or bigger. If you're paying a decent chunk into a pension from when you start work it's quite achievable. And of course it's precisely the people who earn the most who need to worry the most about tax. People who earn nothing don't need to worry at all.

But that aside, there are lots of other factors. For a start you may be retired from full-time work but still working part-time or on an occasional i.e. consulting basis. There will be lots of people with BTL properties they'l be hoping to have no mortgage on by then, meaning all the rent will be subject to income tax. Savings will be subject to income tax. And also plenty of people will have a chunk of final-salary pension. To give an example, the final salary at BT where I worked a fair while was 2/3 of your final salary (index-linked) if you worked 40 years. So 1/3 of your final salary if you worked 20 years & so on. I know tons of people who did 20-odd years at BT then left in their early 40s (massive release program in BT in the 80s) with whacking great final salary pensions waiting to kick in. Some of those guys are higher-rate taxpayers on that final salary pension alone, let alone whatever other pension arrangements they make in the next 20 years!

Re your final paragraph you appear to be confusing investment vehicles with what you'll do with your pension pot once you retire. A SIPP is what you put your money into. An annuity is what you're forced to purchase with (most of it) when you retire.