Osbourne's tax relief changes in the March budget

gadgetmind

Note that it's all still very complicated as if your pension payment from employer drifts around a little, it can go either side of April 6th, so you may get 10 contributions in one tax year and 14 in the next!

TheTracker

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

Salary Sacrifice and Employer Contributions are different beasts. Although it is perfectly valid for an employee to make a sacrifice salary in exchange for a contribution by the employer, I don't feel it is justifiable to equate a contribution made by an employer that wasn't the result of a deliberate salsac action with an equivalent salary. They are different aspects of renumeration that are differently weighed by individuals when they agree to the job. If an individual has a £40k salary and the employer makes a £10k annual contribution, its a stretch to tell the employer no longer to make that contribution but instead to increase the salary. By how much? Now both employee and employer make NI payments. And it opens of the gap to DB pensions even further. Whatever the solution is, it has to allow employer contributions that were not the result of salsac.

zagfles

michaels wrote: »

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

I think the PIP change helps as it effectively gives extra allowance?

Depends what your PIP was. To take the extreme cases, a PIP which ends on 6 April there would be virtually no extra, for a PIP which ends 5 April, ie already tax year aligned, you'd likely get any contributions between 6 April and 8 July this year "free".

And for 15/16 PIP and tax year copincides doesn't it?

No, there's 2 or 3 PIP's this tax year! That's why there's the bigger allowance, see the technical note. But the current PIP ends on 5 April.

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 the "100% of relevant earnings" rule is completely separate from the AA rules. It uses the tax year.

There's too much simplistic rubbish in the media which tries to combine the limits eg saying you can contribute 100% earnings subject to £3600 min, £40k max. This is rubbish not only because one uses the PIP and the other the tax year, but also because the AA includes employer conts, the "100% earnings" limit doesn't, the AA can be carried forwards, the "100% of earnings" can't, etc.

TheTracker

zagfles wrote: »

It sounds like they're just doing the usual thing of floating a few ideas to see what the reaction is, and making them quite extreme so that what they actually end up doing comes as a bit of a relief to everyone.

I reckon that is true, and it works well for many areas. But for pensions it just creates more fear, uncertainty, and doubt in an area already full of it and which is counter productive.

GunJack

TheTracker wrote: »

Salary Sacrifice and Employer Contributions are different beasts. Although it is perfectly valid for an employee to make a sacrifice salary in exchange for a contribution by the employer, I don't feel it is justifiable to equate a contribution made by an employer that wasn't the result of a deliberate salsac action with an equivalent salary. They are different aspects of renumeration that are differently weighed by individuals when they agree to the job. If an individual has a £40k salary and the employer makes a £10k annual contribution, its a stretch to tell the employer no longer to make that contribution but instead to increase the salary. By how much? Now both employee and employer make NI payments. And it opens of the gap to DB pensions even further. Whatever the solution is, it has to allow employer contributions that were not the result of salsac.

Over-complicating again...... part of the trouble is that lots of people on here are still in the entrenched mindset that contributions, tax relief, etc must all in some way be interlinked similar to what they are now, but just be tinkered with... I'm saying REALLY simplify things - yes, have employer contributions, but at a set level in the same way that employee's could be, e.g 15% by employee, 5% or 10% by employer, or whatever, but make it the same for everyone, simple and can easily be understood. You want to put away more? no probs, just not in a "pension", and after you've paid tax on it....

zagfles

TheTracker wrote: »

Salary Sacrifice and Employer Contributions are different beasts. Although it is perfectly valid for an employee to make a sacrifice salary in exchange for a contribution by the employer, I don't feel it is justifiable to equate a contribution made by an employer that wasn't the result of a deliberate salsac action with an equivalent salary. They are different aspects of renumeration that are differently weighed by individuals when they agree to the job. If an individual has a £40k salary and the employer makes a £10k annual contribution, its a stretch to tell the employer no longer to make that contribution but instead to increase the salary. By how much? Now both employee and employer make NI payments. And it opens of the gap to DB pensions even further. Whatever the solution is, it has to allow employer contributions that were not the result of salsac.

Why should it make a difference whether the salary is £40k plus a £10k employer contribution, or a £50k salary with the employee choosing to sal sac £10k into the pension? They are the same and should be treated the same.

It happens with company cars now. Some people get a company car as part of the job. Some people sal sac for a company car. In both cases, the employee is taxed (P60) on the salary received after the sal sac, and the company car is taxed as a benefit (P11D).

It makes no difference to the taxman whether the car is the result of a sal sac or not. Similar could be done with pensions in the event of flat rate relief. Employee would avoid NI on sal sac as with a car, but employer may have to pay class 1A.

gadgetmind

zagfles wrote: »

This is rubbish not only because one uses the PIP and the other the tax year, but also because the AA includes employer conts, the "100% earnings" limit doesn't, the AA can be carried forwards, the "100% of earnings" can't, etc.

All of which came courtesy of Pensions Simplification!

GunJack

TheTracker wrote: »

If an individual has a £40k salary and the employer makes a £10k annual contribution, its a stretch to tell the employer no longer to make that contribution but instead to increase the salary.

Why? What should it matter to the employer if they're forking out 10k in pension conts or salary, it's still 10k!!

GunJack

zagfles wrote: »

Why should it make a difference whether the salary is £40k plus a £10k employer contribution, or a £50k salary with the employee choosing to sal sac £10k into the pension?

that is substantially different to what I was proposing.... I was still for employer contributions but at a fixed percentage, with the employee still salsac-ing a fixed percentage In your example above it's either/or on the employer contributions, which would be wrong.....

EdSwippet

GunJack wrote: »

Why? What should it matter to the employer if they're forking out 10k in pension conts or salary, it's still 10k!!

And yet... my employer is more willing to lose an employee than they are to convert £10k of pension contribution into £10k of salary. I honestly have no idea why.