Pensions: George Osborne to drop tax relief plans

rpc

gadgetmind wrote: »

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 ...

Or just make things simpler and remove the distinction between tax and NI (for employees at least, you could retain employer NI if you like taxes on jobs).

gadgetmind

rpc wrote: »

you could retain employer NI if you like taxes on jobs).

If I could shoot just one tax then it would be employer's NI. People don't notice it as it's not anywhere on their pay slip, but it's the money they earn being taxed just the same.

hyubh

rpc wrote: »

Which usually drastically undervalue the benefits.

You sure? For the sake of argument, a teacher on £57K: £16K for the year + CARE accrual at the start of the year x 0.256 + adjustment for any final salary benefit value change = total pension growth for AA purposes of perhaps £20K. Under a flat rate tax relief system, this same figure could then be used as the total notional pension contribution (employee and employer) and would easily outstrip the total actual employee and employer contribution paid during the year.

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?

As you say, LGPS employer rates typically include a past service contribution that can take them well past the TPS rate. However, avoiding issues with actual employer contributions is precisely a key benefit of the AA multiple approach.

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.

Which is why I think it would quickly lead to fundamental reform, which will really be needed anyway once contracting out ends and the ratio of pension benefit to upfront pay becomes badly out of sync for lower paid staff across the public sector.

michaels

Thrugelmir wrote: »

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

I still think sal sac might be in danger

Spidernick

gadgetmind wrote: »

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

Not unless I'm missing something, as 20% tax and 12% NI totals 32%, which was less than 33% the last time I looked!

zagfles

Spidernick wrote: »

Not unless I'm missing something, as 20% tax and 12% NI totals 32%, which was less than 33% the last time I looked!

13.8% employer's NI is also saved, most employers pass on part of that saving to employees who use sal sac.

lisyloo

zagfles wrote: »

13.8% employer's NI is also saved, most employers pass on part of that saving to employees who use sal sac.

They don't all do that. My last employer was 50/50.
On what basis do you say most? Just personal experience?
Most of my employers didn't even do salary sacrifice.

[Deleted User]

Spidernick wrote: »

Not unless I'm missing something, as 20% tax and 12% NI totals 32%, which was less than 33% the last time I looked!

Methinks somebody needs to go to specsavers ....:rotfl:

zagfles

lisyloo wrote: »

They don't all do that.

Which is why I didn't say "all".

My last employer was 50/50.

What do you mean 50/50? They shared 50% of their NI saving? That would give you a marginal rate of around 39%, far better than the 33% flat rate proposed.

On what basis do you say most? Just personal experience?

And what people write here.

Most of my employers didn't even do salary sacrifice.

We were talking about employers who do do sal sac.

Aretnap

michaels wrote: »

I still think sal sac might be in danger

Realistically, how easy is it to eliminate salary sacrifice? Without making employer contributions a taxable/NIable benefit - which would remove the incentive for employers to provide their staff with pension contributions, so would hardly be a Good Thing?

I mean, I can see that the government might be able to ban people from arranging to reduce their salaries in return for higher employer pension contributions (which is what salary sacrifice boils down to), but suppose this December I ask my employer to increase my pension contribution instead of giving me a pay rise? (My employer is small enough that I might just be able to pull this off) Can they, sensibly speaking, ban employers from Increasing pension contributions for their staff? If not, I could easily be back where I am now in terms of sal sac in a few years.