Osbourne's tax relief changes in the March budget

rpc

EdSwippet wrote: »

These are people bumping up against the new LTA. Once they hit it, their pension contributions are taxed, by design, more heavily than if they had taken income. Yet unlike (some of) the private sector, they cannot choose salary over pension. In effect the pension contributions part of their compensation package will now be less efficient than plain old salary. All the unions are asking for (apparently) is the option to transmute pension contributions into taxable salary. Salary after 40% tax is higher than pension after 55% tax.

In what way are they forced to contribute to the pension? If they don't want the charge, they can opt out. Anyone else would lose the employer contribution if they opted out so why should public sector workers be different?

As the DB schemes move to career average, this is likely to be a very short term problem. CARE-style schemes don't have the same late-in-career AA issue that final salary schemes do.

EdSwippet

rpc wrote: »

Anyone else would lose the employer contribution if they opted out ...

Not really. From a PWC survey of employers done a month ago to gauge the reaction of companies to the changes:

"Three in ten of the companies that have DB schemes are considering closing future accrual for scheme members. Over a third (35%) have made the decision to implement cash allowances. For the companies that have closed to new entrants, but remain open to accrual, half are in discussion to offer cash allowances. Other options include offering flexible accrual to prevent their employees breaching the lower annual allowance.

Those companies with defined contribution (DC) pension schemes are also considering their options. One in two companies are in discussions to offer cash as an alternative to their affected employees, while 42% are considering restricting contributions to prevent their employees breaching the annual allowance threshold."

Playing_with_Fire_2

_CC_ wrote: »

What did the FT article say for the poor people like me who don't have a subscription? :cool:

Google the name of the article, then view a cached version of it (other search providers are available).

AlanP_2

I doubt if my point below applies to all private sector jobs but does to many.

I have worked in the private sector (IT industry) for the majority of my working life and have only been in the public sector for the last 7 years and the big difference is that I negotiated my private sector package with the employer when joining and at each annual pay review so that I ended up with a package that suited my circumstances at the time and that fit within whatever constraints the employer was working within.

For example - Company Car or Car Allowance or mix of both to upgrade car (with a personal top-up option) and so on.

There was no fixed reward package for the grade as such so that there was disparity between employees doing the same nominal job (potential issues with equality there obviously).

In the public sector jobs are graded and assigned to a salary scale and you get whatever benefits are on offer and whatever pay rise the organisation offers.

Everyone treated equally by the process with limited flexibility on either side.

So putting to one side whether public sector pay is too high, or the DB pensions are too generous and the like the ability to swap Benefit A for Benefit B does not really exist and that is what the unions seem to be asking for at the fundamental level.

_CC_

Playing_with_Fire wrote: »

Google the name of the article, then view a cached version of it (other search providers are available).

Nice one :money:

TheTracker

AlanP wrote: »

I doubt if my point below applies to all private sector jobs but does to many.

I have worked in the private sector (IT industry) for the majority of my working life and have only been in the public sector for the last 7 years and the big difference is that I negotiated my private sector package with the employer when joining and at each annual pay review so that I ended up with a package that suited my circumstances at the time and that fit within whatever constraints the employer was working within.

For example - Company Car or Car Allowance or mix of both to upgrade car (with a personal top-up option) and so on.

There was no fixed reward package for the grade as such so that there was disparity between employees doing the same nominal job (potential issues with equality there obviously).

In the public sector jobs are graded and assigned to a salary scale and you get whatever benefits are on offer and whatever pay rise the organisation offers.

Everyone treated equally by the process with limited flexibility on either side.

So putting to one side whether public sector pay is too high, or the DB pensions are too generous and the like the ability to swap Benefit A for Benefit B does not really exist and that is what the unions seem to be asking for at the fundamental level.

I completely agree. The public sector need a way to react to tax and condition changes through remuneration dialogue.

I've already raised my rates to account for the additional 7.5% dividend tax due in April.

Those in the public sector have no such ability. It is already difficult enough to attract people to those jobs, and we do need (many of) them. I'm all for equalisation of pensions and raised packages to rebalance but I expect this is political suicide. Hence we get cushy pensions to obscure the total remuneration package.

greenglide

The public sector need a way to react to tax and condition changes through remuneration dialogue.

As does large parts of the private sector.

Earlier in my career I worked exclusively for small private sector companies and could negotiate my individual package and its structure. I then ended up in Local Government and suffered the rigid structures there. Now, working for a large US owned multinational it is the worst of both worlds. We have "compensation" (which in no ways compensates) which is "flexible" (we can buy add-ons to our monetary salary at non-competitive rates but we do get salary sacrifice pension) but the overall package is take it or leave it. Worst of all we are all on a percentage of the average salary for our grade. I have yet to find anyone who admits to get more than 90% of the average, presumably people in other locations get more. When top level managment in the State says "there will be no increases this year" there are none, there is noone to negotiate with.

This used to be a relatively good company but it fell on hard times (in the States rather than here) and it got taken over. Takeovers are generally not good!

chiefie

Lots of articles about this around at the moment with a belief that Ozzie will do it with immediate effect from March 16th - can't see it myself but I didn't see pension freedom coming

LXdaddy

greenglide wrote: »

As does large parts of the private sector.

Earlier in my career I worked exclusively for small private sector companies and could negotiate my individual package and its structure. I then ended up in Local Government and suffered the rigid structures there. Now, working for a large US owned multinational it is the worst of both worlds. We have "compensation" (which in no ways compensates) which is "flexible" (we can buy add-ons to our monetary salary at non-competitive rates but we do get salary sacrifice pension) but the overall package is take it or leave it. Worst of all we are all on a percentage of the average salary for our grade. I have yet to find anyone who admits to get more than 90% of the average, presumably people in other locations get more. When top level managment in the State says "there will be no increases this year" there are none, there is noone to negotiate with.

This used to be a relatively good company but it fell on hard times (in the States rather than here) and it got taken over. Takeovers are generally not good!

Up to the last par you could be working for the same company as me. My company is generally doing the acquiring rather than being acquired these days.


But working for a large multi national comes with some advantages and some disadvantages so (as always) there is a balance to be looked at.


The idea of flexibility to negotiate your own package is non-existent. There is no way to influence what the company does. And although the employees should be one of the company's greatest assets it doesn't seem like it.


Don't get me wrong - I work for a very good company, the company is healthy and tries always to perform well and do well for all the stakeholders. I'm proud to work for it and would recommend it to my friends.


But individual negotiation just simply doesn't happen. And there is no meaningful consultation on changes either. When it comes to things where there is a legal requirement to consult the employees then consultation takes place and the original proposal is implemented.

DaveMcG

I can't understand how employer contributions are going to be taxed. If the position is unchanged, then salary sacrifice or new terms and conditions could make all schemes non contributory.

If employer contributions are non-relievable, then there would be a mass closure of private sector schemes and possibly legal action taken due to the preferential treatment of the public sector.

If employer contributions are relievable but deemed to be taxable on the employee, many of these would be sent into higher rate tax by contributions (the valuation of which in the case of defined benefit would be a can of worms).