Pensions: George Osborne to drop tax relief plans

Thrugelmir

What's not known is if there will still be changes. Might not be radical in nature.

peterg1965

I think I would bet on no change at all now, including LTA and AA. The reduction to £1M LTA only kicks in next month.

bigadaj

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.

Depends how you define earned I suppose.

Flat rate is attractive in that in the long term it could save money, reducing benefits on those abive pensionable age both by incentivising people and pointing out the opportunity if they don't.

The implementation would be problematic and messy though, and the current system is at least logical from an accounting perspective.

westv

Of course, if various governments hadn't been so zealous in making as many people as possible pay HRT the extra tax benefit might not have been so widespread.

gadgetmind

fastestlouigie wrote: »

The tax relief on pensions requires modifying

No it doesn't.

yet another perk for the middle classes.

Everyone can save (subject to caps) into a pension tax free. Class doesn't play any part and there isn't even a box on the tax return for you to indicate what class you think you might be.

Snakey

westv wrote: »

Of course, if various governments hadn't been so zealous in making as many people as possible pay HRT the extra tax benefit might not have been so widespread.

Now that would be a fantastic way of framing it!

"I have reviewed the cost of pensions relief for the well-off and agree it's disgraceful that a £1 pension contribution only costs a higher-paid worker 60p when it costs a lower-paid worker 80p. In consequence, I have decided that I will REMOVE HIGHER RATE TAX RELIEF ALTOGETHER! by increasing the basic rate band to £150k."

*cue wild cheering on both sides of the House while trying to keep straight faces*

gadgetmind

JoeCrystal wrote: »

YHaving at 33% tax relief for basic rate taxpayer would be a boon

If paying by salary sacrifice, then BR tax payers already get above this level of saving between tax and NI.

JoeCrystal

gadgetmind wrote: »

If paying by salary sacrifice, then BR tax payers already get above this level of saving between tax and NI.

I suppose so but only if the employer offer salary sacrifice which doesn't happen everywhere unfortunately.

gadgetmind

It would be very easy for HGM to provide an NI reclaim on pension contributions for those not paying by sal sac. Well, they say they want to encourage saving ...

rpc

hyubh wrote: »

Surely the opposite - to implement, some sort of notional employer contribution would now need to be included when calculating DB scheme members' taxable pay.

Which usually drastically undervalue the benefits.

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.

Don't forget civil servants.

The widespread unfunded public sector pensions are exactly why, IMHO, any significant change would be very lenient on DB schemes.

Doing it right is far too complex even when a scheme is funded and analysed by actuaries. How would you tax an employer's top-up payment made direct to the scheme? It would be a taxable benefit for the employees but not recorded on payroll. How do you tax payment holidays? It's a reduction in contributions but also not reflected through payroll.

Even flat rate tax relief would likely push a teacher on the standard scale (for example) into higher rate tax if properly calculated. Or a charge nurse. That would be very very unpopular.