Pensions: George Osborne to drop tax relief plans

tigerspill

fastestlouigie wrote: »

The tax relief on pensions requires modifying and I was sure a Tory Chancellor wasn't going to make major changes, as it's yet another perk for the middle classes. He probably will revisit it but with another set of proposals. A classic case of feeding "info"/rumours, then putting forward what you actually intended to do, making you look like you're compromising by listening to all interested parties.

Why do you call it a middle class perk? It is nothing of the sort.
Those people earn that money. It is just they are giving less of it away, allowing them save to allow them fend for them selves in later life.

This is great news if this is what happens later in the month.

saver861

Well he said in the Autumn statement he was working on changes - which inferred there would be big changes. Trouble is the EU thingy got in the way - not sure why he was not aware of that possibility at the time of the Autumn statement.

However, it is late to ditch the plan given that its just over a week to budget day. He still has to find dosh somewhere - and I'm not sure he has enough time to come up with something else new.

Therefore, it depends on what the fall back options are!

I was hoping for a 33% tax relief myself ..... bit more free money from SIPP's for the Mrs and myself. Ah well ....

rpc

It was never going to happen under a Tory govt anyway - the DB schemes would have ended up so ludicrously better of than DC pensions that the private sector would be up in arms.

Part of it is probably a game - prepare people for something terrible and then impose something more gentle and they will feel relief rather than pain.

JoeCrystal

saver861 wrote: »

I was hoping for a 33% tax relief myself ..... bit more free money from SIPP's for the Mrs and myself. Ah well ....

Yes, saver861, that is why I am disappointed about that. Having at 33% tax relief for basic rate taxpayer would be a boon, especially it would at least improve all these low contribution that the basic taxpayers pay in. I might be wrong but I think a lion share of tax relief go to higher and top-rate tax payers? Trying to find statistics and came up empty.

robin61

Great news and maybe the result of a lot of pressure from the media and from his own MPs I am sure.
I wonder if he will still have a go at the lifetime or annual allowances though ?

Actually for the first time ever I wrote to my MP and to be fair to him he said he would pass my letter onto the treasury. Funnily enough I got a reply from him this morning with a letter from the treasury. It was just platitudes about the review they were having but at least it shows that people's concerns were at least being heard.

Bootsox

JoeCrystal wrote: »

Yes, saver861, that is why I am disappointed about that. Having at 33% tax relief for basic rate taxpayer would be a boon, especially it would at least improve all these low contribution that the basic taxpayers pay in. I might be wrong but I think a lion share of tax relief go to higher and top-rate tax payers? Trying to find statistics and came up empty.

I never really understood the 33% tax relief proposal, does it not mean giving money to people who hadn't earned it?

Whereas the existing arrangements mean giving higher rate tax relief to people who have earned it.

hugheskevi

I might be wrong but I think a lion share of tax relief go to higher and top-rate tax payers? Trying to find statistics and came up empty.

This PQ answer is quite helpful in terms of stats.

It shows the impact of the Annual and Lifetime Allowance changes at the top end.

There is a roughly 40/60 split between nil/basic rate taxpayers and higher/additional rate. When I last looked at this topic in detail, the proportion of tax relief going to higher/additional rate payers was close to the proportion of income tax paid by this group. That was before Annual Allowance changes and automatic enrolment, so I suspect higher/additional rate taxpayers get proportionally less tax relief than income tax paid now.

JoeCrystal

Thanks hugheskevi! Quite an interesting read.

Bootsox wrote: »

I never really understood the 33% tax relief proposal, does it not mean giving money to people who hadn't earned it?

Whereas the existing arrangements mean giving higher rate tax relief to people who have earned it.

A fair point!

hyubh

rpc wrote: »

the DB schemes would have ended up so ludicrously better of than DC pensions that the private sector would be up in arms.

Surely the opposite - to implement, some sort of notional employer contribution would now need to be included when calculating DB scheme members' taxable pay. Use (say) the annual allowance method (nice and simple, and already used and understood for the AA itself), and you could well end up in a few years with doctors, higher grade teachers, police officers etc. actively agitating for scrapping pure DB and introducing a sensible hybrid system (or just higher upfront pay) instead.

zagfles

hugheskevi wrote: »

This PQ answer is quite helpful in terms of stats.

It shows the impact of the Annual and Lifetime Allowance changes at the top end.

There is a roughly 40/60 split between nil/basic rate taxpayers and higher/additional rate. When I last looked at this topic in detail, the proportion of tax relief going to higher/additional rate payers was close to the proportion of income tax paid by this group. That was before Annual Allowance changes and automatic enrolment, so I suspect higher/additional rate taxpayers get proportionally less tax relief than income tax paid now.

Seems to only mention income tax, not NI relief (when using sal sac) or tax credits/benefits relief which could change the picture quite a lot.

For instance a basic rate taxpayer who gets tax credits and uses sal sac to contribute to a workplace scheme currently gets 73% "tax relief". Flat rate relief would have made such people far worse off even if set at 33%!