Two Eds are worse than one.

Aegis

Cyberman60 wrote: »

You cannot denigrate private sector schemes without also criticising public sector schemes. Public sector schemes are in your logic a Ponzi scheme on the taxpayer. :rotfl:

Broadly speaking, yes. Public sector employees with final salary benefits are entirely dependent on taxpayer funding for their retirement, not their own payments into the scheme.

chucknorris

Cyberman60 wrote: »

You don't know what the tax rate will be on taking out. Nobody does. The current 40% band is around 40K so I really have no sympathy if you consider an annual pension on that level is insufficient. I have a good retirement on under 25% of that !!! :rotfl:

What on Earth are you rambling on about?

I didn't say it wasn't enough, I said that it wouldn't be value.
I know that I will be a higher rate tax payer.
If you haven't noticed yet, this is forum board to discuss pensions, particularly obtaining value, and what I am saying is that it will not be value to only get 20% tax relief investing but paying the higher rate of tax when withdrawing pension. I (and others in the same boat) would be better off not bothering with pensions.


But the point is moot because zagfles is correct, labour plan to restrict the 20% relief only to the highest rate tax payers, as well as restrict the annual allowance to £30k. Well done zagfles (you lead me to find it), here is a link:


http://www.hl.co.uk/news/articles/labour-plans-to-restrict-pension-tax-relief

zagfles

kidmugsy wrote: »

Are you really suggesting that they'll cut relief for 45% payers to 20% but leave the relief for 40% payers at 40%? You seem to have an even lower opinion of them than I have.

That's exactly what they are proposing and it's exactly what they did in the last years of the previous Labour govt. Or planned to anyway, till they got voted out. I think people were still affected by the anti-forestalling measures brought in.

Of course what they promise and what they do are two different things. They broke their promise on tuition fees in 2004, by introducing top-up fees after having stated in their 2001 manifesto that they wouldn't (and then have the hyprocrisy to criticse the Lib Dems for breaking their promise on fees, even though they are in a coalition and Labour weren't!)

zagfles

chucknorris wrote: »

But it just isn't worth getting only 20% tax relief going in, but paying 40% tax taking it out (which I would be), even when taking into account the 25% TFLS, it still isn't worth it. What would be my motivation to invest via a pension wrapper? I am going to have to be careful as it is, trying to avoid the 60% tax band when a pensioner, which would be even more disastrous if I was only getting 20% relief when investing.

If you're in the 60% band when drawing your pension you're going to be way over the LTA!! Unless you're taking the whole lot out quickly or don't expect to live long...

chucknorris

zagfles wrote: »

That's exactly what they are proposing and it's exactly what they did in the last years of the previous Labour govt. Or planned to anyway, till they got voted out. I think people were still affected by the anti-forestalling measures brought in.

Of course what they promise and what they do are two different things. They broke their promise on tuition fees in 2004, by introducing top-up fees after having stated in their 2001 manifesto that they wouldn't (and then have the hyprocrisy to criticse the Lib Dems for breaking their promise on fees, even though they are in a coalition and Labour weren't!)

Are you sure about that? I hope that you are correct, do you have a link, I have found info on the 45% relief being lost, but nothing saying that the 40% tax relief would remain in place.
Zagfles is correct, labour plan to restrict the 20% relief only to the highest rate tax payers, as well as restrict the annual allowance to £30k. Well done zagfles (you lead me to find it), here is a link:


http://www.hl.co.uk/news/articles/labour-plans-to-restrict-pension-tax-relief

chucknorris

zagfles wrote: »

If you're in the 60% band when drawing your pension you're going to be way over the LTA!! Unless you're taking the whole lot out quickly or don't expect to live long...

I will not because most of it (about £70-75k) will come from non pension income, i.e. rental income and dividend income (outside of my SIPP), that figure also includes my state pension.

Cyberman60

chucknorris wrote: »

What on Earth are you rambling on about?

I didn't say it wasn't enough, I said that it wouldn't be value.
I know that I will be a higher rate tax payer.
If you haven't noticed yet, this is forum board to discuss pensions, particularly obtaining value, and what I am saying is that it will not be value to only get 20% tax relief investing but paying the higher rate of tax when withdrawing pension. I (and others in the same boat) would be better off not bothering with pensions.

I think the majority of people would disagree with you on that. Pensions are still good value even with 20% tax relief on payments in. For other money there are still ISAs for which all growth is tax free.

TheTracker

chucknorris wrote: »

But it just isn't worth getting only 20% tax relief going in, but paying 40% tax taking it out (which I would be), even when taking into account the 25% TFLS, it still isn't worth it. What would be my motivation to invest via a pension wrapper? I am going to have to be careful as it is, trying to avoid the 60% tax band when a pensioner, which would be even more disastrous if I was only getting 20% relief when investing.

100% agreed. If tax relief on input dropped to or below tax incurred on output, it wouldn't make sense to contribute. Even today that stops people from pension contributions, as they've assumed the withdrawal rate will be higher in decades hence. Personally, I would cease contributing to a pension if the relief for HRT earners dropped to 30% let alone 20%. I earn considerably more than 150k, and I'd simply turn to other ways to be tax efficient, I'd probably pay more tax than I do today, but any government calculation that assumes I'd suddenly be giving them the proceeds of a 10/20% change is flawed.

It's a disappointing policy, not just for me but for society.

I'll be sure to check back here when the opposing parties suggest similar policies, and see how the oppugners here contribute.

zagfles

chucknorris wrote: »

Are you sure about that? I hope that you are correct, do you have a link, I have found info on the 45% relief being lost, but nothing saying that the 40% tax relief would remain in place.

That's what I said - the proposal is to cap relief at 20% for those earning about £150k (plus the reduction to the AA & LTA), it doesn't mention losing 40% relief for those who earn less. That doesn't mean they won't do it - it's just not in the proposal.

My own view is they won't because it's too hard - especially with all those generous public sector pension schemes, it would cause chaos if they have to value & tax those if they push people into 40% tax.

Thrugelmir

Aegis wrote: »

Why? Higher rate relief is only available to those already paying higher rate tax. That's the whole purpose of the tax relief - it's designed to defer a proportion of your income into retirement rather than taking it now.

Tax relief was given in order to encourage saving for retirement. That's it's fundamental purpose. Given the increases in personal tax allowances the vast majority of people will no longer pay tax on a proportion of their private pension income at all. That in itself is an attraction to all tax payers. Personally I would prefer the removal of artificial relief's if everybody received a personal allowance that was at least at a basic subsistence level. Make for a far simpler and fairer system. That wouldn't require Civil Servants performing non productive jobs as well.