Budget

AlanP_2

rpc wrote: »

A change in public sector discount rates which will bump up employer contributions.

So he's getting more money to spend by taking more money from public sector employers whose money comes from the budget. All rather circular...

But that seems to be it.

Thought that was only unfunded Public Sector schemes so not applicable to LGPS for example?

RichandJ

rpc wrote: »

A change in public sector discount rates which will bump up employer contributions.

So he's getting more money to spend by taking more money from public sector employers whose money comes from the budget. All rather circular...

But that seems to be it.

Ah yes, the old circular argument. I've been burned on here before for suggesting public sector employees don't actually "pay" any tax - it all comes out of & goes back to the Treasury. So I won't suggest it again. 😉

zagfles

PensionTech wrote: »

I understand multiplication;

Yeah but we all need a reminder every now and again

yes, this factor in isolation makes no difference, but it does make a difference when you combine it with others e.g. moving down a tax band.

Already heavily caveated eg "assuming BR taxpayer in work and in retirement". That's the way this conversation usually goes when someone forgets their school day maths. You've handled it better than most

PensionTech

Already heavily caveated eg "assuming BR taxpayer in work and in retirement"

Yes - so the mention of compound interest came when I introduced the other factors...:

Not allowing for compound interest, moving down tax bands, higher access age, (much) lower annual allowance or employer contributions though

I am sitting the actuarial exams at the moment so I would certainly hope that I haven't forgotten my "school day maths"!

robin61

Actually the increase in the 40% tax threshold is a disadvantage to me as I have been paying enough into my AVC to take me slightly below the threshold and as a bonus I also get a bit of my wife' s tax free allowance.
So raising the level to £45k means I will have to pay less into my pension in 2017/18 if I want to benefit from the 40% tax relief.
Another little tick in the plus column for retiring next year I think.

kidmugsy

robin61 wrote: »

Actually the increase in the 40% tax threshold is a disadvantage to me as I have been paying enough into my AVC to take me slightly below the threshold and as a bonus I also get a bit of my wife' s tax free allowance.
So raising the level to £45k means I will have to pay less into my pension in 2017/18 if I want to benefit from the 40% tax relief.
Another little tick in the plus column for retiring next year I think.

My dear sir, your argument is daft. Would you object even more if the HRT threshold were raised to (let us say) £50k and you didn't need to avoid 40% tax at all?

robin61

kidmugsy wrote: »

My dear sir, your argument is daft. Would you object even more if the HRT threshold were raised to (let us say) £50k and you didn't need to avoid 40% tax at all?

I am not objecting I think too many people have been pulled into it so it' s a good thing overall I am just saying that as I only salary sacrifice into my AVC down to the higher rate amount raising it means I will pay a bit less in than I would have done. I don' t think I have said anything daft if it went up to £50k that would give me even less scope.

The reason I only sacrifice down to the higher rate threshold is because if I pay too much in the AVC it leaves me with a residual amount after I have taken the maximum TfLS and the pension scheme rules are a bit inflexible as to what can be done with any residual. I am fine with these limitations as long as I have had the higher amount of tax relief but if I was only to get the 20% then it is less worthwhile.

beanie414

kidmugsy wrote: »

My dear sir, your argument is daft. Would you object even more if the HRT threshold were raised to (let us say) £50k and you didn't need to avoid 40% tax at all?

I have an AVC as I work for TFL, this is probably a stupid question, but I was wondering if you or someone else would know the answer. Does the change in the higher rate of tax mean that I have to alter my contributions to my AVC? I earn about £50,000 now. I don't understand if the change means I will be better off or worse off.:o

PensionTech

I have an AVC as I work for TFL, this is probably a stupid question, but I was wondering if you or someone else would know the answer. Does the change in the higher rate of tax mean that I have to alter my contributions to my AVC? I earn about £50,000 now. I don't understand if the change means I will be better off or worse off.

You will be no differently off. I assume that your pension contributions together with your AVC take your earnings to below the HR threshold. As the HR threshold is rising, you will still be under it. The same amount will go into your pension as before and you will pay the same tax as before (well, slightly less tax actually as the BR threshold is also rising very slightly, but that is not what you appear to be asking about). You may experience less thrill in the knowledge that your pension contributions are helping you to avoid HR tax, but there is no actual financial change to your circumstances.

If my assumption is wrong and you are currently paying HR tax after your AVCs are deducted, then you will be better off as a result of the changes to the HR threshold, because less of your taxable earnings will be subject to HR tax.

You do not need to alter anything. If your intention is only to make AVCs to the extent that you are not subject to HR tax, then you may wish to pay less in AVCs since it is now easier to drop below the threshold, but that isn't really something that you "need" to do in order to rectify any particular loss.

beanie414

PensionTech wrote: »

You will be no differently off. I assume that your pension contributions together with your AVC take your earnings to below the HR threshold. As the HR threshold is rising, you will still be under it. The same amount will go into your pension as before and you will pay the same tax as before (well, slightly less tax actually as the BR threshold is also rising very slightly, but that is not what you appear to be asking about). You may experience less thrill in the knowledge that your pension contributions are helping you to avoid HR tax, but there is no actual financial change to your circumstances.

If my assumption is wrong and you are currently paying HR tax after your AVCs are deducted, then you will be better off as a result of the changes to the HR threshold, because less of your taxable earnings will be subject to HR tax.

You do not need to alter anything. If your intention is only to make AVCs to the extent that you are not subject to HR tax, then you may wish to pay less in AVCs since it is now easier to drop below the threshold, but that isn't really something that you "need" to do in order to rectify any particular loss.

Hi and ty for quick reply.My AVC comes out of my pay before tax is taken out so seems I would be better off thanks.