Osbourne's tax relief changes in the March budget

bigadaj

RickyB2000 wrote: »

I find it interesting that a lot of people say that the extra tax relief HRT payers get is unfair. This assumes that it is fair these people pay a higher % of tax in the first place. In the current system, if you earn £1000 gross you get to keep that if you put into a pension - regardless of your tax rate. You don't earn anything extra. Looked at a certain way, this seems fair. The only people who earn extra are non earners and those who contribute from personal allowance income.

Though the usual counter argument to all this is that these people can afford to pay the extra tax, so why not (someone has to pay for everything).....

Some think it fair and some unfair.

Logically it makes little sense for a government to allow higher earners to shelter large amounts from tax when these people are likely to be able to finance their retirement with little or no recourse to benefits.

It makes more sense to try and persuade lower earners to contribute as this is likely to reduce the number of people reliant on means tested benefits.

The change to a flat rate pension is aimed to reduce recourse to benefits for many, but if you have a fixed pot to spend then it makes sense to target those at the lower earnings end for tax relief. As to whether that is truly a fixed pot is of course another point of debate.

robin61

RickyB2000 wrote: »

I find it interesting that a lot of people say that the extra tax relief HRT payers get is unfair. This assumes that it is fair these people pay a higher % of tax in the first place. In the current system, if you earn £1000 gross you get to keep that if you put into a pension - regardless of your tax rate. You don't earn anything extra. Looked at a certain way, this seems fair. The only people who earn extra are non earners and those who contribute from personal allowance income.

Though the usual counter argument to all this is that these people can afford to pay the extra tax, so why not (someone has to pay for everything).....

Yes you get more tax relief because you pay a higher rate of tax. I am all for level playing fields but to have that we all need to pay tax at the same rate.

Even so it seems that this flat rate is the favourite. If that was set at say 30% it means some will get only partial tax relief and some will be getting what amounts to a kind of tax credit.

gadgetmind

bigadaj wrote: »

Logically it makes little sense for a government to allow higher earners to shelter large amounts from tax

No sheltering. Simply saving *your* money that you have earned for your old age, and paying tax on it then.

when these people are likely to be able to finance their retirement with little or no recourse to benefits.

But these are the very people who fund all the benefits that many others wallow in, so best not to hammer them too hard lest they simply relocate or take other steps (as I have done) to prevent too large a shovel being shoved into their stores.

gadgetmind

robin61 wrote: »

If that was set at say 30% it means some will get only partial tax relief

AKA "pay tax on their pension savings".

some will be getting what amounts to a kind of tax credit.

AKA getting more tax relief than the tax they would have paid, with the rest coming from some magic money tree.

bigadaj

gadgetmind wrote: »

No sheltering. Simply saving *your* money that you have earned for your old age, and paying tax on it then.

But these are the very people who fund all the benefits that many others wallow in, so best not to hammer them too hard lest they simply relocate or take other steps (as I have done) to prevent too large a shovel being shoved into their stores.

Like I said its all down to opinions and these vary.

Good luck to you with your four day week but no one is indispensable and that work will be taken up elsewhere by others.

I seem to recall you were recently complaining about the fact there was no shovelling of £225,000 allowed annually any more.

A lifetime allowance of around £1 million would generate around the higher rate level of income assuming normal investment returns which seems logical to me,

I personally want to see some balance in the system, and we did seem to be getting somewhere near in my opinion. My reservation is that relatively few standard rate taxpayers will find the 30%ish attractive, which won't make up for the higher rate tax taxpayers who don't consider it worthwhile any more, but the government might consider this a saving to the treasury.

RickyB2000

bigadaj wrote: »

My reservation is that relatively few standard rate taxpayers will find the 30%ish attractive, which won't make up for the higher rate tax taxpayers who don't consider it worthwhile any more, but the government might consider this a saving to the treasury.

This is my view on things. I suppose it may also drive HRT payers to consume instead - helping the economy (until they realise too late their DC pension isn't enough to keep them as they expected after all).

Thrugelmir

bigadaj wrote: »

My reservation is that relatively few standard rate taxpayers will find the 30%ish attractive,

What's unattractive about a 10% bonus on contributions? Potentially a welcome attraction to encourage people to take responsibility for their own pension provision. Overall a saving for the Treasury too. Still a large budget deficit gap to be bridged. That unfortunately isn't simply going to disappear of it's own accord.

bigadaj

Thrugelmir wrote: »

What's unattractive about a 10% bonus on contributions? Potentially a welcome attraction to encourage people to take responsibility for their own pension provision. Overall a saving for the Treasury too. Still a large budget deficit gap to be bridged. That unfortunately isn't simply going to disappear of it's own accord.

Nothing unattractive and I can see in many ways it is a good idea, just not convinced that people will take up the 'free money', after all there are probably millions that miss out on significantly more than this by not contributing currently and missing out on employers contributions.

saver861

bigadaj wrote: »

Good luck to you with your four day week but no one is indispensable and that work will be taken up elsewhere by others.

That is true. There is always someone younger, hungrier. Losing 10% is not going to make many high earners take flight.

bigadaj wrote: »

My reservation is that relatively few standard rate taxpayers will find the 30%ish attractive,

Not sure why you think not?

RickyB2000

Thrugelmir wrote: »

What's unattractive about a 10% bonus on contributions? Potentially a welcome attraction to encourage people to take responsibility for their own pension provision. Overall a saving for the Treasury too. Still a large budget deficit gap to be bridged. That unfortunately isn't simply going to disappear of it's own accord.

Will it though? Perhaps to a 50 something heading into retirement. How many 20 / 30 year olds would see 10% extra in 40 years time worthwhile when they are paying extortionate levels of rent / morgatage today. Also, how many people actually trust pensions? No wonder the government had to introduce the workplace pension to force people to save.

I think the only people who really care are those heading into retirement and those with enough cash that tax effeciancy becomes a real concern. The rest just pay what their employer suggests and assumes it will be enough.

Agree, the budget deficit needs sorting. Doesn't stop it being a race to the bottom across the board in living standards (esp for young people).