Osbourne's tax relief changes in the March budget

zagfles

hugheskevi wrote: »

If the communication that not all people will get a single rate of pension under single-tier has been poor, then the message that single tier ends means-testing has been downright misleading.

DWP evidence (page 29) shows that there is almost no change in eligibility to housing and council tax benefit.

The chart on page 30 shows that entitlement to any means-tested benefit is only fractionally reduced under single-tier. Under the existing system, around 50% of pensioners are entitled to means-tested benefits, and this would fall to slightly under 30% in 2060. Under single tier it falls to about 26/27%, so very little difference.

So whilst the new system significantly reduces entitlement to Pension Credit, it does very little to solve any incentive to save problem caused by means-tested benefits.

A radical solution to this could be to reduce the applicable amount for pensioners to the same level as the under 60's. That would massively reduce the number of pensioners getting means tested benefits, whilst still maintaining a safety net of the same level as working age unemployed.

No way could they do it for existing pensioners, but they could for future pensioners...

gadgetmind

zagfles wrote: »

whilst still maintaining a safety net of the same level as working age unemployed.

Seems to be more of a comfort blanket, but yes!

neilvw

hugheskevi wrote: »

If the communication that not all people will get a single rate of pension under single-tier has been poor, then the message that single tier ends means-testing has been downright misleading.

DWP evidence (page 29) shows that there is almost no change in eligibility to housing and council tax benefit.

The chart on page 30 shows that entitlement to any means-tested benefit is only fractionally reduced under single-tier. Under the existing system, around 50% of pensioners are entitled to means-tested benefits, and this would fall to slightly under 30% in 2060. Under single tier it falls to about 26/27%, so very little difference.

So whilst the new system significantly reduces entitlement to Pension Credit, it does very little to solve any incentive to save problem caused by means-tested benefits.

Is this a clue in the document that this issue will be addressed?:

Despite the average HB award falling, these changes have a limited effect on the overall number of people claiming HB. This is because it takes a lot of additional income to be taken out of HB entitlement altogether, and the Government is proposing to protect the outcomes of those who could otherwise lose some rent support among people reaching State Pension age in the first five years after implementation. Therefore even where people are no longer entitled to Pension Credit (whether through removal of Savings Credit or higher state pension income) some entitlement to housing or council tax support may remain.

One caveat is that the report assumes the triple lock will continue indefinitely (even Steve Webb thinks another decade or so is enough).

Another unknown is the long-run take-up rate (and persistence rate) of auto-enrolment.

princeofpounds

The benefits to HRT payers is enormous

Yes and no.


The benefit, per pounds saved, is only lucrative because tax rates are remarkably high really - I always think it's worth bearing a sense of perspective on that.


It's also worth remembering that although the aggregate sums involved can seem to be quite large (for example, the £1m lifetime allowance), they are in fact only just enough for people to make a comfortable provision for their retirement. Even if you max out your entire pension allowance over your lifetime, you aren't remotely going to be bathing in Cristal and eating oysters every morning.


Of course they are, in total, a significant sum of money for the exchequer, which is still struggling to balance the books.

Sterlingtimes

A new wave of press articles seem to regard the apparent Treasury information exposed to a Financial Times journalist as authoritative. This may signal a single rate of relive of between 20% and 33% would be given on all pension savings.

But in such circumstances, would employer and employee contributions be dealt with on the same basis? Would this lead to employer contributions becoming salary and subject to income tax and employee National Insurance deductions?

kidmugsy

MDMD wrote: »

Personally I would be in favour of just scrapping the 25% tax free lump sum

There's not much to be said for abolishing the one feature of the present system that The Man on the Clapham Omnibus understands and finds attractive.

EdSwippet

Also worth noting that unions are now asking for a carve-out of the latest LTA reductions for senior civil servants, doctors, police officers and head teachers.

Personally I think they have a point. And in general it's an odd day when I find myself in full agreement with a trade union...

gadgetmind

EdSwippet wrote: »

Also worth noting that unions are now asking for a <link removed> for senior civil servants, doctors, police officers and head teachers.

Link doesn't work for me.

Personally I think they have a point. And in general it's an odd day when I find myself in full agreement with a trade union...

Why should they get special dispensation when those putting in their own money and taking market risk don't?

Seabee42

It makes no sense that civil servants should be treated more favourably tax system wise than the people who pay for it? Of course the people affected would not want to be worse of who does.

PensionTech

Personally I think they have a point. And in general it's an odd day when I find myself in full agreement with a trade union...

I don't, and here's why: the LTA is much more generous for those in DB schemes than DC. Let's say you're 55 and retire early (with actuarial reduction of course) with an index-linked, joint-life DB pension of £50k per annum - the LTA used up is £1m. Now say you're 55 with a DC pot of £1m. You'll still use up the £1m LTA, but what annuity do you think you could purchase with that? Even at 60? Even at 65?

What I do agree with is that the LTA is being cut to the level where it's not just hitting "fat cats" any more. The bigger problem for public sector workers, though, is the Annual Allowance - that really does hit DB savers hard, as all you need is a modest payrise after a couple of decades in the job (think senior nurse) to suddenly be faced with a tax bill that would usually be the preserve of someone regularly earning six figures and using their pension as a tax avoidance vehicle.