Budget - Green paper on pension contribution tax relief

Paul_Herring

Paul_Herring wrote: »

Some Suggestions for the New Pensions Minister

Oh - another choice nugget in there:

. Cap total combined annual ISA and pensions contributions at £30,000 ...

This is to encourage saving for retirement remember...

...and scrap the lifetime allowance.

Assuming a 4% growth rate, and £2,500 monthly (£30K/year) contribution (not taking account inflation for either contributions or final amount) it would take around 22 years to reach the current lifetime allowance.

So they suggest scrapping the lifetime allowance ... by replacing it with the yearly allowance which does much the same thing.

woolly_wombat

EdSwippet wrote: »

It would be a short period, if not for the fact that consultation is merely window dressing for a foregone conclusion.

The Daily Telegraph postulated at the weekend that Steve Webb's preferred solution would be adopted by the current government. That would explain the short time frame.

See http://www.telegraph.co.uk/finance/personalfinance/pensions/11730761/Welcome-to-Britains-new-world-of-buy-two-get-one-free-pension-saving.html

Extract:

"Even the industry, which long fought any cuts in pensions tax relief, has accepted the inevitable. Concerned it could be axed altogether, firms are now calling for tax relief to be reduced, and retained.

A consultation on the issue was announced this week. But it looks to me like an open-and-shut case. The new and inevitable system will be one where everyone, regardless of how much tax they pay, will get a 33pc boost to any pension money they save. In other words, you put in £2, the Government adds £1."

Bad news for higher rate taxpayers. Good news for everyone else.

WW

marlot

Paul_Herring wrote: »

So they suggest scrapping the lifetime allowance ... by replacing it with the yearly allowance which does much the same thing.

There is a huge difference - one is on the inputs, one is on the fund value.

If my fund does well over the next few years, I'll hit the lifetime allowance. It's really hard to plan, because its not something I have huge control over.

It would be much fairer to scrap the LTA.

zagfles

woolly_wombat wrote: »

The Daily Telegraph postulated at the weekend that Steve Webb's preferred solution would be adopted by the current government. That would explain the short time frame.

See http://www.telegraph.co.uk/finance/personalfinance/pensions/11730761/Welcome-to-Britains-new-world-of-buy-two-get-one-free-pension-saving.html

Extract:

"Even the industry, which long fought any cuts in pensions tax relief, has accepted the inevitable. Concerned it could be axed altogether, firms are now calling for tax relief to be reduced, and retained.

A consultation on the issue was announced this week. But it looks to me like an open-and-shut case. The new and inevitable system will be one where everyone, regardless of how much tax they pay, will get a 33pc boost to any pension money they save. In other words, you put in £2, the Government adds £1."

Bad news for higher rate taxpayers. Good news for everyone else.

WW

Not really, a basic rate taxpayer using salary sacrifice is getting about 45% tax & NI relief (inc employer's NI, which is often wholly or partially added to the pension).

If they went for a flat rate tax relief they'd obviously have to put something in place to stop salary sacrifice otherwise it'd be trivially easy for higher rate taxpayers to avoid. Either that or make employer pension contributions a taxable benefit.

Bootsox

zagfles wrote: »

Not really, a basic rate taxpayer using salary sacrifice is getting about 45% tax & NI relief (inc employer's NI, which is often wholly or partially added to the pension).

If they went for a flat rate tax relief they'd obviously have to put something in place to stop salary sacrifice otherwise it'd be trivially easy for higher rate taxpayers to avoid. Either that or make employer pension contributions a taxable benefit.

Not at my place it isn't, the employer keeps the lot.

zagfles

Bootsox wrote: »

Not at my place it isn't, the employer keeps the lot.

Even so, a basic rate taxpayer gets 32% tax & NI relief, plus lowering taxable income for the purposes of things like tax credits and student finance etc. So some basic rate taxpayers using sal sac may be very slightly better off, many (most?) will be worse off.

Paul_Herring

Bootsox wrote: »

Not at my place it isn't, the employer keeps the lot.

New entrants to our place's current scheme are likewise hobbled.

Nevertheless, with the NI savings, basic rate tax payers are still getting a 20% IT + 12% NI saving.

32% -> 33% isn't much to write home about.

And that's before any other benefits that Salary Sacrifice attracts which will probably be scrapped/reduced.

kidmugsy

marlot wrote: »

It would be much fairer to scrap the LTA.

I'm persuaded but is Geo. Osborne?

adspence

Paul_Herring wrote: »

The meddlers just can't help themselves. Not only have the government restricted my expected state pension, we have think tanks wanting to further restrict my private pension!

I can't agree more. Let's hope they don't listen to this stupid meddler. I'm 50 now, and plan to stop at 55 in late 2019. This would push my ability to get access to my pension funds until the end of 2024 at 60 as I wouldn't catch up this moving target until then.

Basically a disaster, and would certainly stop me saving in my pension, something I'd immediately ramped up last year on the back of the new flexible rules. I'd need a way to fund the 5 years from 55-60. It would also be another 5 years for the growth to push me closer to the LTA. It is MY money. It should be MY choice when I access it. This git basically wants me to work longer just because I'm theoretically going to live longer...which may not be the case at all! I'll be fitter, healthier and more active at 55 than I will be at 60 no matter what people think about increased longevity. If I have the funds to support a 40+ year retirement then I should be allowed to do so.

Also, why stay working when some youngster can have my job instead?

This would be a seriously bad move.

chiefie

In exactly the same boat.

When they moved the pension age from 50 to 55 what were the rules then for advance notice anyone know ?