Osbourne's tax relief changes in the March budget

Snakey

On an entirely personal selfish level, I'd be happy to trade a reduced annual contribution (but still getting relief at my marginal rate) for the removal of the LTA. Certainly better than taxing me on my own and my employer's future contributions with a potential punitive tax rate on the way out too.

I probably have this in common with everybody who's been willing and able to make hay while the sun shines - including, I suspect, a lot of MPs. Existing pots large enough that we don't need to be throwing in forty grand a year any more, but young enough that investment growth plus a few grand a year employers' contribution is likely to take us over the limit by the time we get there.

I don't deny it's a nice problem to have.

After my mini-rant a few days ago about newspaper columnists who appear not to grasp the concept that* putting £1 of gross salary into a pension leads to £1 going in to your pension pot regardless of what rate of tax you pay, today's "irk of the day" is the idea that flat rate relief at 20% on employers' contributions is neutral to basic-rate payers and relief at 32% gives rise to a huge "top up" for them. Why do you think the suggested possible relief levels all happen to settle on 32%, specifically, as one of the options? Nope? No idea at all? Sheesh. I could write better columns than half the ones I've read on this subject.

*[Edited to add: At least, for most employees. I accept that if you make your own contributions into something different out of net pay then the method of relief is different. But that's not what most people do, is it?]

westv

Spidernick wrote: »

However, whatever happened to encouraging people to save for their retirement?:(

I was wondering that too.

madeinireland_2

Snakey wrote: »

On an entirely personal selfish level, I'd be happy to trade a reduced annual contribution (but still getting relief at my marginal rate) for the removal of the LTA. Certainly better than taxing me on my own and my employer's future contributions with a potential punitive tax rate on the way out too.

I probably have this in common with everybody who's been willing and able to make hay while the sun shines - including, I suspect, a lot of MPs. Existing pots large enough that we don't need to be throwing in forty grand a year any more, but young enough that investment growth plus a few grand a year employers' contribution is likely to take us over the limit by the time we get there.

I don't deny it's a nice problem to have.

After my mini-rant a few days ago about newspaper columnists who appear not to grasp the concept that* putting £1 of gross salary into a pension leads to £1 going in to your pension pot regardless of what rate of tax you pay, today's "irk of the day" is the idea that flat rate relief at 20% on employers' contributions is neutral to basic-rate payers and relief at 32% gives rise to a huge "top up" for them. Why do you think the suggested possible relief levels all happen to settle on 32%, specifically, as one of the options? Nope? No idea at all? Sheesh. I could write better columns than half the ones I've read on this subject.

*[Edited to add: At least, for most employees. I accept that if you make your own contributions into something different out of net pay then the method of relief is different. But that's not what most people do, is it?]

I agree with this - scrap the LTA and reduce the AA would be fine by me.

BobQ

Rich2808 wrote: »

I believe there is one public sector DB scheme where the employer contribution rate is over 35 per cent but employees pay only 5 per cent. Let's just say this is the most strike prone organisation in the country! Their employees can still retire at 60 on full benefits and their pensions are still updated by RPI.

How are they going to deal with DB schemes in terms of this or will it only apply to DC.

http://www.standard.co.uk/news/transport/cost-of-gold-plated-transport-pensions-soars-to-16-billion-8626828.html

Probably a niche low membership scheme like the Judicial one

http://www.if.org.uk/wp-content/uploads/2014/02/Reforms-to-the-Judicial-Pension-Scheme-IF-Response.pdf

They seem reluctant to even disclose the figures.

As for the TfL scheme -spending £18m subsidising transport passes to families of members seems a disgrace.

BobQ

Sorry if this has been mentioned earlier but the following suggests that the pension providers have been arguing against the interests of their customers in the expectation of gaining from future customers.

http://www.thisismoney.co.uk/money/pensions/article-3418131/How-pension-giants-stabbed-customers-government-plots-axe-tax-breaks-expose-big-firms-failing-protect-cash.html

Probably nothing new in such an approach but hearing insurers make arguments based on fairness rather goes against the grain.

hyubh

BobQ wrote: »

Probably a niche low membership scheme like the Judicial one

Judges are 'strike-prone'...?

They seem reluctant to even disclose the figures.

In what way? Employee and employer contribution rates are quoted in the scheme guide:

https://jac.judiciary.gov.uk/sites/default/files/sync/basic_page/new_judicial_pension_scheme_0.pdf

However, it's an unfunded scheme like Teachers etc., so the concept of a past service deficit for older versions of the scheme doesn't exist.

As for the TfL scheme

Ah, that sounds more like it. However, it isn't a statutory scheme, and so on one commonly-used definition is not a 'public sector' one in the way the TPS/PPS/FPS/LGPS etc. are (e.g. it has a board of trustees, pays the PPF levy, etc.). That said, the employer rate might be 35% with the past service contribution...?

gadgetmind

Dunno what I'll do if they go ahead with this madness. Pay £8k tax on my £40k pension contribution next year? That doesn't sound appealing, but neither does going without employer contributions and hitting the personal allowance clawback.

RickyB2000

gadgetmind wrote: »

Dunno what I'll do if they go ahead with this madness. Pay £8k tax on my £40k pension contribution next year? That doesn't sound appealing, but neither does going without employer contributions and hitting the personal allowance clawback.

Assuming they don't change it so pension contributions no longer reduce income for clawback. I can see this happening if they tax your pension up front and then apply a flat rate credit later (assuming this eliminates sal sac)

gadgetmind

This one could be a real train crash if they get it wrong, which they are likely to do!

zagfles

RickyB2000 wrote: »

Assuming they don't change it so pension contributions no longer reduce income for clawback. I can see this happening if they tax your pension up front and then apply a flat rate credit later (assuming this eliminates sal sac)

Flat rate relief would almost certainly mean that gross income before deducting pension conts (probably with the "taxable benefit" of employer conts added on top) is used for purposes such as the PA reduction, child ben tax, and probably tax credits and income assessment for stuff like uni loans too. Otherwise it won't be "flat rate".