Two Eds are worse than one.

chucknorris

Cyberman60 wrote: »

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.

They aren't value if you are paying 40% withdrawing it! How can they be? I don't think anyone that can count will agree with you.


You pay in £800, it gets grossed up to £1,000, with the 25% TFLS you pay (currently) 40% on £750 = £300, so for every net £800 invested you withdraw only £700 (plus any growth). It would be better to just invest it outside of a pension, where you would not lose £100 and only pay tax on the profit (not the entire sum).


I know ISA's are tax free, what I am saying is that pensions will not be value to higher rate tax payers, if that is what labour are actually proposing, zagfles has cast some doubt on that, I hope that he is correct.


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

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.
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

HL love this sort of proposal - brilliant sales opportunity for them!

zagfles

TheTracker wrote: »

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

I had to google that! MSE forums - educate you in English as well as finance!

chucknorris

zagfles wrote: »

HL love this sort of proposal - brilliant sales opportunity for them!

Yeah it certainly is. As a matter of a fact we have just started to switch our investments from fidelity to HL. Mainly because of the vanguard ETF's having much cheaper fees, but also because we have been given quite a bit of misinformation by Fidelity.

Spidernick

For company schemes it may still make sense to put into pensions for higher earners, but you'd need to look at the employer contributions and work out the overall position with those versus what you could do with the money elsewhere with no employer 'top up'.

Some additional rate taxpayers may see Venture Capital Trusts as more of an incentive than currently (30% relief - unless those are also under attack!), depending on their attitude to risk.

Why any Party would actively discourage people from saving towards their retirement through pensions escapes me.

kidmugsy

Aegis wrote: »

There's absolutely no rationale to picking this arbitrary level of salary to suddenly hit with crippling penalties

Ho yuss there is. The current Prime Ministerial salary, inclusive of his MP's pay, is £142,500. So there is a very good reason to whack only those on more than £150k.

Mind you, that means that it would presumably be a few years before they moved the whacking threshold down to £100k and then £50k. Or rather perhaps £67.5k, that being the MP's salary.

kidmugsy

Cyberman60 wrote: »

Public sector schemes are in your logic a Ponzi scheme on the taxpayer.

Well of course they are: that's not even contentious.

Personally I dislike the jargon of private sector/public sector. Really the distinction is between government employees and everyone else. To pretend that all government employees offer the public a service, and that employees of companies, partnerships, charities and so on, and the self-employed, don't offer the public a service is just a cunning way to bias political discussions. For example, as members of the public we received a better service from Tesco twenty years ago than we did from the local primary school.

rpc

So how are they going to enforce the reduced tax relief on anything but a personal pension?

Occupational pensions would have to include the employer contribution, otherwise it is an easy dodge to change to salary sacrifice. But if you change to salary sacrifice then you need an honest employer contribution which is hard to do for defined benefit schemes. How will scheme top-up payments be taxed for private sector schemes? How will the hidden extra contribution from the government be taxed for the public sector?

While I would like to see a flat 30% tax relief on all pension contributions, I don't believe that relief at anything other than the marginal rate is a workable policy. It's either too easy to dodge or it hits the private sector while unfunded public sector schemes provide an easy route to tax evasion for highly paid government employees.

kidmugsy

There is one reform begging to be done on Defined Benefit schemes: instead of valuing them for LTA purposes as twenty times pension plus any lump sum, the multiplier should be increased to thirty to reflect the low index-linked annuity rates that have been available for some time now, and presumably for the foreseeable future.

BobQ

Spidernick wrote: »

Why any Party would actively discourage people from saving towards their retirement through pensions escapes me.

Is there any real reason why current tax rates and current tax relief on pensions rates need to be the same?

Would you support a policy giving 60% relief to 40% tax payers and 80% to 45% taxpayers?

I agree that the LTA and AL may not have been pitched correctly in the Labour proposal.