Budget: Hammond mulling tax cuts for young paid for by slashing pension tax reliefs

soulsaver

economic wrote: »

yes i would agree. he doesn't need the cash (he has a fair bit in ISAs and normal savings accounts). so its best to just go ahead with the annuity.

Advise him to get the numbers for 20 & 25 year guarantees - they're surprisingly little less than a 10 year, in my experience.

Lokolo

Rich2808 wrote: »

Problem with the pension system is that the government keeps tinkering with it so you cannot plan ahead - endless annual cuts to life time and annual allowances and now threats to reduce pension tax reliefs.

Of course boomers and pensioners have had the benefit already of the generous tax relief for higher rate taxpayers - whereas today's young people have not. So any cut to tax relief will actually in the long term hit the young more not help them - as they will get old too but won't get the tax relief when they really start paying in in their 40s and 50s!.

The government tinker a lot with everyone. Over the past 10 years or so...

The young (compared to those in older generations) do not have the option for DB pensions, they have greater student debt at a much higher cost, less affordability for housing (house prices vs wages and inflation)

The more well off have had higher taxes and reduction of personal allowance.

Services are being cut left right and centre.

And we are still in deficit :rotfl:

You cannot guarantee anything. I am at least 30 years from retirement. I have a decent pension pot. Goodness knows when I'll get access to it or what will happen with my contributions in the future.

Malthusian

soulsaver wrote: »

Advise him to get the numbers for 20 & 25 year guarantees - they're surprisingly little less than a 10 year, in my experience.

As it's a GAR they may only offer 5 year or 10 year guarantees under the GAR terms, though it doesn't hurt to ask.

Seabee42

If they are going to restrict tax relief for higher earners I do hope at least they do away with the silly annual allowance limits for higher earners.


The recent election has rightly scared the Tory's and they look incompetent . When they tried to increase the tax for the self employed so the self employed paid a similar amount to the employed they quickly backtracked. They have no gumption for hard decisions.


The cost of the elderly in this country is growing living longer means higher pension costs and much higher NHS costs and someone has to pay. As usual this cost is not paid by the pensioners themselves they still get benefits that do not make sense like the winter fuel allowance and triple lock. I am not at all surprised that the young do not think they are getting a good deal because they are not. Sure the elderly paid taxes to but they paid for a much smaller group of pensioners and not themselves.


The reason pension tax relief for higher earners may well go is politicians have frequently got away with such raids before and whether people have enough to retire on is tomorrows problem.


Sadly the more you disincentive saving the more likely people will rely on the state for living costs which is unsustainable.

economic

Malthusian wrote: »

As it's a GAR they may only offer 5 year or 10 year guarantees under the GAR terms, though it doesn't hurt to ask.

you are right, my dad found out, max is 10years. he will just go for that.

michaels

Lokolo wrote: »

The government tinker a lot with everyone. Over the past 10 years or so...

The young (compared to those in older generations) do not have the option for DB pensions, they have greater student debt at a much higher cost, less affordability for housing (house prices vs wages and inflation)

The more well off have had higher taxes and reduction of personal allowance.

Services are being cut left right and centre.

And we are still in deficit :rotfl:

You cannot guarantee anything. I am at least 30 years from retirement. I have a decent pension pot. Goodness knows when I'll get access to it or what will happen with my contributions in the future.

In 1979 basic rate taxpayers paid 33% tax and 6.5% NI = 39.5%. The personal allowance was 1165
Today basic rate tax is 20%, NI is 12% and graduates pay 9% on income but only over 21k (rising to 25k) - so 32% on income up to 21k and 41% above this. Personal allowance is 11.5k.

Seems to me that even with all this student debt, tax payable by graduates is not very different no to when baby boomers were starting out in their jobs, however much the media want to scream about inter-generational unfairness.

Do you see it differently?

zagfles

michaels wrote: »

In 1979 basic rate taxpayers paid 33% tax and 6.5% NI = 39.5%. The personal allowance was 1165
Today basic rate tax is 20%, NI is 12% and graduates pay 9% on income but only over 21k (rising to 25k) - so 32% on income up to 21k and 41% above this. Personal allowance is 11.5k.

Seems to me that even with all this student debt, tax payable by graduates is not very different no to when baby boomers were starting out in their jobs, however much the media want to scream about inter-generational unfairness.

Do you see it differently?

Agree in terms of tax/NI/uni loan repayments - the young now aren't any worse off than the boomers. However the main issue which screws the young is housing, which is massively more expensive than it was for the boomers, especially in the south-east.

If the govt had any sense and balls they'd come up with policies which damp down house price inflation instead of policies which fan the flames such as help to buy etc.

Silvertabby

Agree in terms of tax/NI/uni loan repayments - the young now aren't any worse off than the boomers. However the main issue which screws the young is housing, which is massively more expensive than it was for the boomers, especially in the south-east.

If the govt had any sense and balls they'd come up with policies which damp down house price inflation instead of policies which fan the flames such as help to buy etc. Posted by zagflies

House prices started to soar in the 1980s because, up until then, mortgages were capped at 3.5 times the husband's salary and (at the most) 1 x the wife's salary. This was because the wife was expected to give up work once the kiddies came along.

Then came the 1980s, when a combination of the new sex equality laws and the fact that more and more mums returned to work meant that a wife's salary could be taken into account when determining the affordability of a mortgage. Couples borrowed more money because they could, leading to higher offers etc etc.

There's no going back from this.

Filo25

Does the government actually have the votes to push through a budget with a cut to higher rate tax relief on pension contributions, I suspect not given they are likely to have a few rebels on the right of the party (and it wasn't in the manifesto).

It's not the first time the idea has been floated and while closing the deficit looks even tougher now, there will still be opposition from the right of the party and the parliamentary arithmetic is even more difficult now, hence I suspect it won't be a particularly contentious budget.

I hope so anyway as the 62% "band" is starting to become an issue for me and I was hoping to avoid it in the usual way, by substantially increasing my pension contributions (which I need to do anyway as my pot is completely inadequate)

AlanP_2

Malthusian wrote: »

That is very unlikely to happen due to the number of civil servants that would have to pay tax out of their own pocket on the massive pension contributions they receive.

You can't have a situation where one higher rate taxpayer gets 20% relief because they pay contributions out of their own money while another gets 40% relief because their contributions are paid directly by their employer before tax is taken off. So people who get employer contributions would have to pay a 20% or 25% tax charge on everything the employer paid into their pension (40/45% minus 20% basic rate relief). For public sector workers whose employers could be paying 23% of their salary into the LGPS that's a huge amount of money to find.

Don't really follow the logic of this. Are you suggesting that the employee should pay tax on the employer's pension contribution over and above a flat rate of say BR tax @ 20%?

Why? Employer's contribution doesn't attract personal tax relief now so why make things even more complicated and bring it into scope?

At the moment an employee in a employer scheme typically has their contributiuon taken off GP to arrive at taxable pay - so get 20/40/45% relief as appropriate.

Paying into a SIPP / PP outside an employer scheme they get 20% relief added by HMRC/ Provider and reclaim the additional tax paid from HMRC.

So both people ending up putting the same net amount into their pension, although admitedly the employee ends up with a bigger pension pot as all the tax relief goes in.

If he were to set a flat rate at BR tax level, thus increasing treasury revenue by all the HR relief, they would still both end up in the same position.

The difficulty, and the "slow lane" bit would be handling the PAYE changes within payroll systems, no employer is going to want that sort of change implemented in a hurry.