Osbourne's tax relief changes in the March budget

gadgetmind

RickyB2000 wrote: »

With all the noise and fear mongering, won't most HRT payers already be piling into pensions?

I've been doing the max for many a year, and did more than the max in one year when they changed the rules 3/4 of the way through.

So it is already costing just talking about it.

I've still less than convinced that pension tax relief actually costs anything.

zagfles

RickyB2000 wrote: »

With all the noise and fear mongering, won't most HRT payers already be piling into pensions? So it is already costing just talking about it.

Maybe that's the plan - encourage them to contribute loads then cut the LTA

There's been speculation about cutting higher rate relief on pension contributions for the last 25 years. It's been done in so many other areas, I remember when they did it to MIRAS and the married couples' allowance in the early 90's there were people saying pensions would be next. When Labour got elected there were articles predicting the imminent end of higher rate relief. When Gordon Brown tried and failed to tax child ben for HRT payers, A-day, after the financial crisis, etc etc.

It's probably more likely now than ever - but until it actually happens it's just speculation which people have seen time and time again and are probably bored of.

Are there any figures on cost of another year? Will there be many HRT payers sitting on piles of.cash.(after filling up this year based on these reports) to really cost that much?

See the link I posted above

zagfles

michaels wrote: »

Guilty as charged - I am putting in about 75k this year (max possible) and was planning to do the same next year. I will talk to my employer about whether the March payment can be made early before the 16th to be on the safe side.

If they cut the annual limit to 25k I am not sure if I will have enough rollover allowance to do what I want to next year. Does anyone know if you 'use up unused allowance from the previous 3 years whther it uses up the most recent year's unused allowance or the furthest back unused allowance first.

EG 11/12 unused 40k
12/13 unused 30k
13/14 unused 30k
14/15 save 70k (40k that year allowance plus 30k from previous years)

What is remaining carry forward allowance for 15/16?
Is it 60k (30k each from 12/13 and 13/14 as the extra 30k in 14/15 counts against 11/12)
Or is it 30k from 12/13 because the extra 30k in 14/15 counts against 13/14 (and 11/13 has dropped out)?

You use up the current years allowance first, then any unused allowance from the last 3 tax years with the earliest first.

See http://www.hmrc.gov.uk/manuals/rpsmmanual/rpsm06108010.htm

But you are aware of pension input periods and have checked the PIP of your schemes? Until July, the PIP didn't need to align with the tax year.

And this year, there is a complicated transition to align them with the tax year, see
http://www.gov.uk/government/publications/pensions-technical-note-transitional-provisions-for-aligning-pension-input-periods/pensions-technical-note-transitional-provisions-for-aligning-pension-input-periods

See also http://www.gov.uk/government/publications/pension-schemes-newsletter-70-july-2015/pension-schemes-newsletter-70-july-2015

This could result in you being able to contribute more than you thought. But how carry forwards operates with this messing around is very complicated and really pretty unclear in some cases.

maximumgardener

GunJack wrote: »

the biggest encouragement for people to save in pensions would be to make the entire thing simpler (and with a better degree of security) than they are currently..let's face it, between pensions and the uk tax system it's way over-complex :mad:

spot on!
need to level the playing field somehow......make pensions more attractive for the legions of standard rate tax payers is must IMO.
lets face it ... state pension probably will get lots more changes of the next 20 years..... the ball is rolling the 30 & 40 year olds need to get saving something for their future!!!!
mg

Naughty_Noonoo

Just another ill thought out policy by the treasury. The cost of administration for 'flat rate pension tax reliefs on contributions' will dwarf any potential tax gains. Very similar to the Child Benefit cap of £50,000 earnings (or £50,099 to be precise). I have heard that it takes a lot of time and effort for the HMRC to chase sums as little as £17.50 when the sensible approach would have been to limit the amount paid in Child Benefit to 2 children per household removing the need for HMRC to get involved (and saving money in these times of austerity).

GunJack

maximumgardener wrote: »

of standard rate tax payers

see, now even that expression will put a lot of people off and it's over-complicating things...

separate out pensions from tax, keep salary sacrifice as a mechanism to contribute but with a 15% of salary limit on contributions, no tax relief on pension contributions, pay tax on the pension income when retired... simple

if you want to save more for your retirement, do so in savings or stocks & shares

N1AK

GunJack wrote: »

see, now even that expression will put a lot of people off and it's over-complicating things...

separate out pensions from tax, keep salary sacrifice as a mechanism to contribute but with a 15% of salary limit on contributions, no tax relief on pension contributions, pay tax on the pension income when retired... simple

if you want to save more for your retirement, do so in savings or stocks & shares

A fixed % of income is a bad idea for a number of reasons. Why not just put a fixed limit on the total amount of tax relief you can get, for example ~£300k. For basic rate payers they'd have to pay in £1.5 million (they won't) before they'd get the full benefit of the tax relief, for higher rate payers the first £750k would be completely tax free.

With a system like that you don't need to consider yearly income, tax rates etc, and everyone can get the same tax relief, and you know exactly how it works without having to worry about total pot size at point of retirement etc.

Once you've gotten your full tax relief you'd stop saving into a pension (which will be taxable income) and can do as you please.

GunJack

N1AK wrote: »

A fixed % of income is a bad idea for a number of reasons. Why not just put a fixed limit on the total amount of tax relief you can get, for example ~£300k. For basic rate payers they'd have to pay in £1.5 million (they won't) before they'd get the full benefit of the tax relief, for higher rate payers the first £750k would be completely tax free.

With a system like that you don't need to consider yearly income, tax rates etc, and everyone can get the same tax relief, and you know exactly how it works without having to worry about total pot size at point of retirement etc.

Once you've gotten your full tax relief you'd stop saving into a pension (which will be taxable income) and can do as you please.

you've missed my point entirely there.......

michaels

zagfles wrote: »

You use up the current years allowance first, then any unused allowance from the last 3 tax years with the earliest first.

See http://www.hmrc.gov.uk/manuals/rpsmmanual/rpsm06108010.htm

But you are aware of pension input periods and have checked the PIP of your schemes? Until July, the PIP didn't need to align with the tax year.

And this year, there is a complicated transition to align them with the tax year, see
http://www.gov.uk/government/publications/pensions-technical-note-transitional-provisions-for-aligning-pension-input-periods/pensions-technical-note-transitional-provisions-for-aligning-pension-input-periods

See also http://www.gov.uk/government/publications/pension-schemes-newsletter-70-july-2015/pension-schemes-newsletter-70-july-2015

This could result in you being able to contribute more than you thought. But how carry forwards operates with this messing around is very complicated and really pretty unclear in some cases.

Thanks - I like the sound of 'earliest first'.

I think the PIP change helps as it effectively gives extra allowance? And for 15/16 PIP and tax year copincides doesn't it?

When PIP was in effect would you have to work out your income for the PIP period rather than the tax year in order to make sure you didn't contribute more than you earned?!

gadgetmind

michaels wrote: »

When PIP was in effect would you have to work out your income for the PIP period rather than the tax year in order to make sure you didn't contribute more than you earned?!

No. PIPs were used to work out if you'd contributed more than the Annual Allowance. For matching contributions against income, tax years were used, and all the carry forwards calculations used tax years, but had to take PIPs into account to see when contributions were made as they are deemed to all be made on the last day of the PIP.