Sigh. CPS's Michael Johnson's pre-budget pension reform calls. Again.

pip895

How many years has it been since this started to be talked about?

One year I guess it will actually happen!!?

Do we really think this could be the year?

stoozie1

The only change I can see happening is NI still being payable after state retirement, and even that being years away.

Roseybug

If they decide to go for this, a really significant impact will depend on whether they keep it as "tax relief" or some new sort of "bonus" under HMRC rules.

Currently, tax relief also reduces the declareable gross taxable income for the purposes of many things, e.g. child benefit clawback, tax credits, universal credits, student finance means testing, child maintenance payments, etc.

Would a "bonus" act in the same way?

It would be particularly underhand for the government to sell this concept as a way to encourage low earners to save into pensions, if the reality is that they end up gaining x% in "bonus" compared to "tax relief", but then lose 63% via Universal Credit clawback. Especially if they are then accused of "deprivation of capital" if moving any of their money across from "savings" into "pension".

Snakey

I was reading some Budget predictions in the paper this morning and apparently reducing the annual allowance (£30k was suggested) was considered more likely, and/or lowering the £150k clawback threshold. This came from Steve Webb.

The point was made that to do a root-and-branch overhaul such as moving to a flat rate relief would take years to sort out... although it wasn't spelled out, the implication I read in to that was that it wouldn't be worth them doing anything that wasn't going to deliver results (i.e. generate cash) this side of the next election.

Perhaps the more interesting numbers were that the revenue generated by putting a penny on the basic rate of income tax, or on employees/employers NI, would massively outweigh the above (although still leaving them way short of the extra money they need for the NHS). In terms of quick fixes, those would be very simple to implement too.

dunstonh

I was reading some Budget predictions in the paper this morning and apparently reducing the annual allowance (£30k was suggested) was considered more likely, and/or lowering the £150k clawback threshold. This came from Steve Webb.

In the last few weeks, the media read the so-called "source" as reducing HR tax relief. However, the wording of the source was about targetting those that can afford to pay tens of thousands of pounds a year. So, annual allowance would make more sense than tax relief. It would be easier and quicker to implement and wouldnt need a pensions act, consultation, providers on board etc (along with a long delay to allow new products to be built).

kidmugsy

They could reduce the AA to £20k and scrap AA tapering and LTA.

That would make everything far easier to understand and eliminate the nasty retrospective flavour that lowering the LTA had. But would it raise any revenue?

Hell, I'd scrap the effective 60% income tax band even if it meant lowering the 45% band to start at £100k. The problem is the conflict of interest: simplicity suits many taxpayers, complexity suits the politician.

dunstonh

But don't forget that any change that helps £30k -£50k earners will be seized on by Labour as the Tories helping Bankers and the rich. Logic and sensibility will be twisted by opposition MPs.

michaels

Having under provisioned in my early career I am now trying to catch up so any reduction in the AA would really screw me (81% effective marginal rate on any money I am no longer able to contribute) - on that basis it is pretty likely.

It is possible to over contribute above the AA and then just pay back the basic rate tax relief on your tax return which actually works out cheaper for me.

ffacoffipawb

michaels wrote: »

Having under provisioned in my early career I am now trying to catch up so any reduction in the AA would really screw me (81% effective marginal rate on any money I am no longer able to contribute) - on that basis it is pretty likely.

It is possible to over contribute above the AA and then just pay back the basic rate tax relief on your tax return which actually works out cheaper for me.

Not if you end up with an LTA tax charge at the other end as well.

ffacoffipawb

dunstonh wrote: »

But don't forget that any change that helps £30k -£50k earners will be seized on by Labour as the Tories helping Bankers and the rich. Logic and sensibility will be twisted by opposition MPs.

With that bunch of loons they will say it helps the Jews.