Well done George dropping pension changes

Fella

Jon_B wrote: »

I agree, a good decision.

I don't understand the problem with the current system. A 40% taxpayer gets more pension relief, but also by definition they will be paying more tax than a basic rate taxpayer.

Besides, it's so easy to fall into the 40% tax bracket these days it's not like it is increased tax relief for the wealthy.

Exactly. Labour like to portray any kind of tax concession like this as Tories helping out their rich mates when in reality all that happens is whoever contributes to a pension does it from their gross pay. The only reason higher-rate taxpayers get a higher rebate is they are paying more in the first place. It's a favourite Labour ploy to portray someone getting back a bit of their own money as some kind of net gain to them.

michaels

It is also of course conveniently not mentioned that a fair bit of the tax is just deferred rather than avoided as pension income is taxable.

Of course it would be fairer still if we didn't have this artificial pretence that NI is not really tax and that the standard rate is 20% when everyone actually pays 32%.

Filo25

They really should merge NI and Income tax and get rid of some of the ludicrous anomalies in marginal tax rates while they are at it, unfortunately with the low standard of political discourse we get I doubt it will ever happen, because people would be complaining about income tax going up when NI was merged into it.

It wouldn't make much sense but then again political "debate" here rarely seems to these days.

Glad to see the change isn't going through anyway, as others have said, in certain parts of the UK you are far from rich if you are sneaking into the 40% band, and I don't think many of us have an issue with incentivising people to save for retirement.

kinger101

Although NI is a tax on income, it differs from income tax in a number of ways, including:

(a) Employers also contribute.
(b) Pensioners don't pay it.
(c) It's not calculated on an annual basis
(d) The self-employed pay at a lower rate.

I'm skeptical whether abolishing NI would result in any less a complex tax system. The treasury doesn't exactly have a good track record on tax simplification.

chucknorris

kinger101 wrote: »

Although NI is a tax on income, it differs from income tax in a number of ways, including:

(a) Employers also contribute.
(b) Pensioners don't pay it.
(c) It's not calculated on an annual basis
(d) The self-employed pay at a lower rate.

I'm skeptical whether abolishing NI would result in any less a complex tax system. The treasury doesn't exactly have a good track record on tax simplification.

Has there been yet another suggestion that NI and income tax might be combined?

wymondham

Maybe he realised if he keeps shafting people who save (ie pensions) then they just might not bother anymore...

Alan_Brown

Fella wrote: »

Exactly. Labour like to portray any kind of tax concession like this as Tories helping out their rich mates when in reality all that happens is whoever contributes to a pension does it from their gross pay. The only reason higher-rate taxpayers get a higher rebate is they are paying more in the first place. It's a favourite Labour ploy to portray someone getting back a bit of their own money as some kind of net gain to them.

The BBC loves to do this, saying that basic rate tax payers need to pay 80p for each 100p into a pension, whereas higher rate taxpayers pay 60p. They never mention that both taxpayers simply pay no tax on their contributions.

Instead of coming up with yet another complex tax regime, the government should just reduce the amount you can put into the pension. They should calculate what amount would give you a decent pension and stick at that figure. Anyone trying to pile huge amounts of money into their pension just to avoid tax (or even worse, to pick up benefits) would be restricted.

This should be applied to final salary pensions too, which would help to redress the disparity between public and private sector pensions.

chucknorris

I think the problem with pensions is that the lifetime allowance is too high, the Gov. shouldn't be subsidising people to have large pensions. The current £1m lifetime allowance combined with state pension, is worth about £42k per annum (per single person, so more for couples). Subsidy should IMO end at about £25k per annum, so reducing the lifetime allowance to £500k would be my one of my priorities, my other priority would be to tackle public sector pensions, they are far too generous. I think that this would have to be done carefully though, probably in conjunction with selected pay rises, to avoid a brain drain from certain professions within the public sector.

michaels

Alan_Brown wrote: »

The BBC loves to do this, saying that basic rate tax payers need to pay 80p for each 100p into a pension, whereas higher rate taxpayers pay 60p. They never mention that both taxpayers simply pay no tax on their contributions.

Instead of coming up with yet another complex tax regime, the government should just reduce the amount you can put into the pension. They should calculate what amount would give you a decent pension and stick at that figure. Anyone trying to pile huge amounts of money into their pension just to avoid tax (or even worse, to pick up benefits) would be restricted.

This should be applied to final salary pensions too, which would help to redress the disparity between public and private sector pensions.

Would you apply a total cap or an annual cap? The former would hit people who might have uneven income due to contracts etc.

chucknorris

michaels wrote: »

Would you apply a total cap or an annual cap? The former would hit people who might have uneven income due to contracts etc.

I think you meant to say latter (not former), that is one reason why I would favour reducing the lifetime allowance, if that was reduced to £500k, I think you could just about forget about the annual allowance. The focus should be on the total (lifetime) pension subsidy, why would it matter if someone invested more in a particular year, unless the concern would be immigrants working here for a short time frame and maxing out on the subsidy during that time, I could see that as a reason to maintain the annual allowance. Focusing on the lifetime allowance would allow people on fluctuating income to invest more in their favorable years, as well as those who suddenly realise later in life, that they need to boost their pension pot.