New pensions freedom under attack before they start

Triumph13

I'll stick my head above the parapet on this little argument and let both sides shoot me down. As I see it there are several linked issues here and you can't have a sensible discussion without accepting the links between them and what they mean.


In isolation, it makes very little sense as a matter of public policy to provide tax breaks on pensions over and above those which are needed for people to be able to provide for themselves, such that they would not need recourse to benefits. People who talk about throwing themselves on the state if higher rate relief is removed are just being silly. Using tax relief on pensions to effectively get a 50% or more topup from HMRC on the savings that fund your early retirement makes no sense as a matter of public policy (HRT payer putting £60 in, uplifted to £100 and very little tax if any paid in early retirement period due to PCLS and PA). I therefore find myself agreeing, to an extent, with some of the more left of centre commentators on this thread that this isn't 'desirable' (though don't worry, I'll upset them in a minute)
The problem though is that the more restrictive you make the rules, and the more often you mess about with them, the less likely it is that the people you ARE wanting to encourage to save and be self sufficient will do so. You can't design a system that successfully encourages the target audience to save, but stops the middle classes from taking advantage of it - not least because a lot of the people you are trying to encourage have aspirations to one day be part of that wealthier middle class themselves.


The real joke though, is that what is actually happening with the middle classes and the wealthy is that they are the ones paying almost all the income tax in the first place, so what we really have is a hugely complicated system to take money off them in tax and then give it back to them in pension tax reliefs. I think many of the right of centre commentators here would probably agree that it would be much better to just cut the higher income tax rates in the first place rather than have all the money passed backwards and forwards through HMRC.


Once again though, if you lower taxes and scrap reliefs, you lose the ability to encourage the people that you want to encourage to save for their retirement.


So in summary:
1. Are the middle classes taking advantage of rules not really intended for them? Yes and I'm one of them.
2. Isn't that dreadful? Not really as it was largely their own money in the first place, paid for by higher tax rates than we would otherwise need.
3. Is it ridiculous to have a complicated system to take money out of one pocket and put it into the other one? Yes, but I've not heard anyone come up with a better solution that still meets the fundamental aims of encouraging those at the mid-to-low end of the income spectrum to be self funding in retirement.

coyrls

Torry_Quine wrote: »

At the young age some people think that it is acceptable to be a pensioner then yes I think it ridiculous.

I don't see how "acceptable" comes in to it. It's a financial decision not a moral one.

agarnett

Triumph13 wrote: »

So in summary:
1. Are the middle classes taking advantage of rules not really intended for them? Yes and I'm one of them.
2. Isn't that dreadful? Not really as it was largely their own money in the first place, paid for by higher tax rates than we would otherwise need.

I have to disagree over your assertion that you have been paying higher tax than otherwise needed. What is higher taxation intended to achieve ? Is it play money for people who aspire to be politicians and leaders, or is it real money which higher rate tax payers should be proud to give up in order to see it used to create infrastructure, welfare and other services which define the real strength and culture of a well-run country?

coyrls wrote: »

I don't see how "acceptable" comes in to it. It's a financial decision not a moral one.

And I disagree with that simplistic view also: how is it that there is such a gap in the UK between those who assert the right to make a financial decision to start an easy life in early retirement and the masses who now believe that they will probably have to work until they drop? How come you can do it, but they can't? Are you wiser than them? Or just quicker on your feet. They are not the same thing. Are you able to make decisions without morals entering the equation? Is that a virtue?

Is their such a gap because the ones working until they drop have been unwise or "failed to save" when sensible people had it all worked out early? It isn't. Is it because hundreds of thousands have perhaps been naively too virtuous or too tolerant of the other sort? It certainly believe the gap largely results because the distribution of wealth in the UK has become completely skewed by absolutely obscene pay packages developed over three decades in the City of London for whole teams or armies of ruthless traders and brokers, and in the menial jobholders have suffered the destruction of anything remotely akin to a substantial trades union. Most right-thinking employees should in fact be members of one but in the UK that is simply not the done thing anymore. Society here has forgotten what trades unions are for and instead have been brainwashed into accepting they have never done good. How terrible is that? So good working people have been exploited worse than their kind ever were 50 years ago and live in fear whilst often being paid a pittance by people occupying roles further up the ladder who convince themselves they are in some way superior in life skills and that their lives are consequently more meaningful and valuable to society! Think again please!

We have a crazy situation where some CEOs can earn hundreds of times more than their lowest paid workers. That is not a financial observation. It is an observation of complete immorality. We should be seeing a situation where no CEO earns more than say 20x that earned by their lowest paid employee, and where the CEO's generally have no compunction in socialising with lower paid workers at work or in their street at home. However that is not how it works in the UK, is it? Labour is scorned by those that scheme their way to the top of the heap. And if you settle for being one of the minions that supports the every whim of overpaid top brass, and is rewarded with a higher than average salary and perks, you are probably one of those who believes he has the right to make a financial decision to retire early. Those that wish to assert their superiority and flaunt their wealth should pay a flaunt tax. They should pay enormous taxes on new luxury cars and yachts and mansions and on purchasing outdated elite educations for their kids. I really don't mind you buying an £100,000 Audi and sending your kids to Montessori nurseries and private Prep schools and Eton, but you should pay £200,000 for the Audi with £100,000 going to the Exchequer, and you should pay £20,000 a term to send your kid to Eton so that £10,000 a term goes to the Exchequer. Then I will stand next to you and say well done - you are building a fine country that is good for us all.

You kid yourselves you earned it, and that you have contributed more than enough tax, and certainly more than your fair share. You are wrong.

Money is just numbers on paper. It really does matter what you did to get it. Better people than those that retire early have been paid much less and will work much longer. Do not scorn them. You should be concerned if you really believe you can retire at 50 when you know that hundreds of thousands the same age may have to continue working until past 70. How is that ever to be taken as a sign of a fair country?

I for one don't buy the sort of minion whom we used to call "Yes men". I actually think it is the single biggest reason why sites such as MSE have to exist i.e. in order to redress the horrible imbalances caused by the pervading culture now of minions willing constantly to unquestioningly please overpaid greedy topbrass. All so the trustie "team players" can take a pat on the head at 50 and pat themselves on the back to retire early based on a financial decision not a moral one - Woo hoo! Bloody marvellous logic!

Meantime the country is down the pan and everyone, ready or not, simply has to have eyes in the back of their head and be quick on their feet now to make sure whatever pension promises they do have are not traded too cheaply for cash or stranded behind incomprehensible barriers, many of which are placed falsely and dishonestly.

Dunnit

There are many on here who are well below the 40% pay bracket who have been careful with their money paying extra into pensions and have now been given the freedom to spend it. Part of the benefit of the latest change has been to allow women to retire at the age they thought they were due to when they first started their pensions 30 years ago.
As for CEOs being paid no more than 20x the lowest salaries then they just outsource jobs until they hit that figure.
The world has moved on in the last 50 years, we no longer need men to go down pits, agriculture work is done from a comfy tractor cab, clerical work is largely automated. Such is life.

agarnett

Dunnit wrote: »

There are many on here who are well below the 40% pay bracket who have been careful with their money paying extra into pensions and have now been given the freedom to spend it. Part of the benefit of the latest change has been to allow women to retire at the age they thought they were due to when they first started their pensions 30 years ago.
As for CEOs being paid no more than 20x the lowest salaries then they just outsource jobs until they hit that figure.
The world has moved on in the last 50 years, we no longer need men to go down pits, agriculture work is done from a comfy tractor cab, clerical work is largely automated. Such is life.

I don't disagree with what you say, but what is your point? Tractor drivers are now more likely to ruin their health e.g. by eating too much and not exercising being too comfortable seated and becoming diabetic, but they do so not in a bed of roses but many in total boredom driving up and down a field all day for stupid hours and low pay when the farmer insists and does not hesitate to put the fear of farming your job out to some Eastern European student if you disagree. I know because I've done enough of it and am still close enough to the game to hear what goes on!

So we do definitely need stronger unions, and I do not mean the National Farmers Union which is more or less an anti-union club of employers and landowners who lobby the government for their own interests and not those of labour!!

Working conditions have in a number of ways moved backwards in recent years and some things are certainly worse than 50 years ago. Retail workers had a very strong union USDAW with high proportion of all shopworkers enrolled. Clerical workers also had unions like MSF with a high proportion of membership in the office.

Zero hours contracts were unheard of except by seasonal potato pickers and by long retired dockworkers remembering their youth!

Sucking up to your nearest boss's minion for the favour of being granted work tomorrow is a great new phenomenon for the children and grandchildren of those that used to go down t'pit at set times and come up again at set times, to endure, I am sure.

And so how much have these people who have never paid higher rate tax actually got in their pensions unless they have been local government workers or NHS or police or fire brigade ? The average "pot" has been mentioned on here as around £36,000 I believe. How long will that last ?

seven-day-weekend

Torry_Quine wrote: »

My MP is one of those listed but I won't be writing to them to object as it seems very sensible to me that pensions shouldn't be accessible early.

I certainly don't think the whole lot should be able to be withdrawn, unless it is placed in some sort of investment wrapper.

Many people will be chomping at the bit to retire, take their money, and buy a Ferrari/take a world trip/blow it all on new furniture etc, that they then won't have enough for their retirement.

A couple I know sold their house at a knock-down price (just enough to cover the shortfall in their endowment policy, about £60k), then bought a sofa costing a few grand and a motorhome costing a few tens of grands, then rented and expected the taxpayer to fund this (which they do).

They can't be the only ones like this.

I do agree however that the old annuity system was very inflexible, so am glad that this aspect is being revised.

OldBeanz

agarnett wrote: »

?...

And so how much have these people who have never paid higher rate tax actually got in their pensions unless they have been local government workers or NHS or police or fire brigade ? The average "pot" has been mentioned on here as around £36,000 I believe. How long will that last ?

That is the average price of an annuity. It does not reflect those who go into drawdown.
Toadying up to your boss has been a factor for many people for as long as I can remember.
Putting some money aside has something that I have always done. The only down side to this is that I have never been able to claim back PPI.
Record car sales, a third of the population over fed, lowest ever mortgage rates and 80% of casualties on a Saturday night being boozed up suggests that there is money in the economy. Other forums on MSE suggest that many believe the spend now worry about it later maxim.
People did not believe the Pension would deliver enough to live on during the eighties during the early Thatcher years so, if they have no money now then so be it.

Moby

kidmugsy wrote: »

I don't agree with the people who airily asset that virtually nobody will withdraw their pensions, blew the lot, and then fall back to freeloading on the taxpayer. (Not least because plenty of people behaved like that when we lived in Australia.) But nonetheless it seems to me obvious that the reforms should be given a good run of years before being revisited. Don't these dullard MPs realise that every time they advocate tightening the rules they just put more people off contributing to pensions?

Increasing the pension age from 50 to 55 with virtually no notice was a dastardly act by Brown. Giving lots of notice of a change from 55 to 57 was far better from the Coalition. And now 60? Dolts!

When does the change to 57 kick in, didn't know about this:(

kidmugsy

agarnett wrote: »

Are you making a statement about unlawful recruitment practice abounding in the UK, or attempting to justify it ... for the purposes of this discussion , of course

Happily you are allowed to employ ill people yourself. Just start a business and get on with it.

kidmugsy

TCA wrote: »

Yet you'd deny others the opportunity to make the same conscious decision and prefer the state dictate when someone can access their hard-saved pension.

Why all this discrimination against pensions that were easily saved?