Two Eds are worse than one.

Aegis

BobQ wrote: »

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

Essentially, yes, because the purpose of pensions is that you put money in relieved from income tax and then pay income tax on the way back out. Consequently the whole retirement savings system is predicated on being able to get money out at the same rate of tax as the relief on contributions.

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

Personally, no, as that would give too much relief, i.e. more than that individual would have paid in tax. I'd personally prefer a new ISA-esque pension system with no tax relief on the way in and also no income tax on the way out. This would be far simpler to administer, though it would need people to split their pensions into old regime and new regime, which would cause issues for a while. Overall though, it would do away with the constant bickering over how much pension tax relief supposedly costs the economy, and it should be popular because it would be an ISA with a greater contribution limit but limits on access before age 55.

Sadly no-one listens to those of us who actually work with pensions day in day out!

zagfles

BobQ wrote: »

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

Because it would cause chaos with employer contributions if they weren't, particularly DB schemes like public sector ones.

kidmugsy

BobQ wrote: »

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

One reasonable justification is that there isn't any tax relief, what you really get is tax deferral. I don't find it a conclusive argument, but it's a good deal more intellectually respectable than the latest Labour proposal.

kidmugsy

Come to think of it, is Labour's proposal of penalising people on over £150k when Moribund expects to be on £142,500 himself just another case of Ed planning to avoid tax? Should we refer to the £7500 at the Ed-room? Oh I think we should.

hugheskevi

Come to think of it, is Labour's proposal of penalising people on over £150k when Moribund expects to be on £142,500 himself just another case of Ed planning to avoid tax? Should we refer to the £7500 at the Ed-room? Oh I think we should.

Assuming the post 2015 MP pension scheme has an accrual rate of 1/60 (it is probably better than that though) Ed will accrue a pension of £142,500 * (1/60) = £2,375 each year.

That will be a pension input of £38,000.

Although maybe there will be some back-tracking on the Annual Allowance reduction from £40,000 to £30,000 when the full implications are examined Or perhaps carry-forward could be extended from 3 to 5 years...

kangoora

What would be the likeliest earliest date this could be brought in - as of April 2016 if Labour win the election?

Any idea how this would affect people planning on contributing >£30k who have an annual gross income of, say £50k if they are using previous year's allowances brought forward?

dunroving

kangoora wrote: »

What would be the likeliest earliest date this could be brought in - as of April 2016 if Labour win the election?

Any idea how this would affect people planning on contributing >£30k who have an annual gross income of, say £50k if they are using previous year's allowances brought forward?

So far, previous changes in the AA have not affected carry-forward of unused allowance from previous years. The only effect would be indirectly in that you may have greater need to use carry-forward.

Thrugelmir

kidmugsy wrote: »

One reasonable justification is that there isn't any tax relief, what you really get is tax deferral.

Taking any 50 year period. Rates of income tax haven't remained static. So the final outcome is uncertain. I was paying 33% basic rate tax when I first started work. So my old Section 226 policies now look exceptionally good value.

zagfles

kangoora wrote: »

What would be the likeliest earliest date this could be brought in - as of April 2016 if Labour win the election?

Last time they brought in anti-forestalling measures so people couldn't make last minute large contributions

Any idea how this would affect people planning on contributing >£30k who have an annual gross income of, say £50k if they are using previous year's allowances brought forward?

I don't think the proposal goes into that sort of detail. Maybe it will in the manifesto. But as above you can't believe what's in it anyway...

zagfles

dunroving wrote: »

So far, previous changes in the AA have not affected carry-forward of unused allowance from previous years. The only effect would be indirectly in that you may have greater need to use carry-forward.

Yes they have - when they reduced it to £50k they only allowed £50k carry forwards from previous years. But when they reduced it to £40k, they allowed the full previous years' carry forwards (ie up to £50k)