A Flat Rate of Tax Relief?

edited 30 November -1 at 1:00AM in Pensions, Annuities & Retirement Planning
120 replies 15K views
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  • ex-pat_scotex-pat_scot Forumite
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    Filo25 wrote: »
    In much the same boat myself
    Ditto!


    It's a long established approach - to ramp up ones' contributions in the evening of the career, when the financial pressures might start to abate, and salaries are at their max.
    In the professions, the max earning window is quite late and quite short!
  • SpreadsheetmanSpreadsheetman Forumite
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    Ditto!


    It's a long established approach - to ramp up ones' contributions in the evening of the career, when the financial pressures might start to abate, and salaries are at their max.
    In the professions, the max earning window is quite late and quite short!
    I did that too and managed to repair a good few years of pension neglect.
  • crv1963crv1963 Forumite
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    I did that too and managed to repair a good few years of pension neglect.

    That's the boat we find ourselves in too.
    CRV1963- Light bulb moment Sept 15- Planning the great escape- aka retirement!
  • SnakeySnakey Forumite
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    I want things to stay as they are for the next four tax years as I salsac my income below that nasty 62% band. I could handle a reduced AA up to a point, but removing marginal rate relief would require a change of plan.

    After then I should be a basic rate payer for a few years and any new regime, not just pensions, that redistributes from rich to poor using "current year income" as a proxy measure of those categories would be neutral or good for me.
  • woolly_wombatwoolly_wombat Forumite
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    Filo25 wrote: »
    Supposedly one of the top targets for the budget, (according to the FT anyway) my pension plans may be about to get destroyed.

    Realistically if it drops down to basic rate relief only I may as well not contribute beyond what the company matches, minimal tax advantage given I would likely be paying basic rate tax on the way out as well, the only advantage would be the 25% TFLS, and I wouldn't want to bet on that still being around in my retirement.
    I can't see tax relief dropping to basic rate, but a taper kicking in at £125,000 as suggested in the FT article, looks plausible.

    It will be justified by the generous ISA allowance - probably the reason it was increased.

    The taper relief is a real nasty for anyone lucky enough to receive an unexpectedly large one-off bonus.
  • While no-one is going to weep for those on the 60%marginal rate (and higher still if you count the fact you’re over the threshold for tax free childcare where applicable) any changes will make a big difference to behaviour. At the moment there are strong incentives to put everything above £100k into a pension. If the tax relief goes we wouldn’t be doing the same in our household but would feel shafted at having to pay such a stupid rate of tax. There would be no incentive to push for bonuses or a bit of extra responsibility. I know that my husband’s salary comes with risk and he won’t necessarily be on those sorts of wages forever. If the government need people to be saving for their pension, there needs to be incentives to do so. I’m not convinced a 30% band for lower rate tax payers would change pension savings that much as cost of living is high and you already see people opting out of brilliant pensions such as the NHS scheme in high numbers.
  • ex-pat_scotex-pat_scot Forumite
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    User6565 wrote: »
    While no-one is going to weep for those on the 60%marginal rate (and higher still if you count the fact you’re over the threshold for tax free childcare where applicable) any changes will make a big difference to behaviour. At the moment there are strong incentives to put everything above £100k into a pension. If the tax relief goes we wouldn’t be doing the same in our household but would feel shafted at having to pay such a stupid rate of tax. There would be no incentive to push for bonuses or a bit of extra responsibility. I know that my husband’s salary comes with risk and he won’t necessarily be on those sorts of wages forever. If the government need people to be saving for their pension, there needs to be incentives to do so. I’m not convinced a 30% band for lower rate tax payers would change pension savings that much as cost of living is high and you already see people opting out of brilliant pensions such as the NHS scheme in high numbers.



    Agreed.
    I got my "bonus discussion" yesterday. My boss asked why I didn't seem particularly pleased about it. It's about £8,000 and I explained that I'd get £3,040 extra in our family pot. It's nice, but frankly not an incentive.
    I know I am in a very fortunate position, but I also know I work horrendous hours, live away from home, travel in the middle of the night, and am always at the beck and call of staff and clients 24x7. The "reward" for really pushing hard is to see about 1/3 of the cash my company gives me for this extra effort.




    On your other point - The 30% flat rate would actually be a reduction on current tax relief, for anyone using SalSac on basic rate.
  • zagfleszagfles Forumite
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    On your other point - The 30% flat rate would actually be a reduction on current tax relief, for anyone using SalSac on basic rate.
    It wouldn't - assuming they treat pensions like any other sal sac benefits. The rules changed last year to clamp down on tax avoidance using sal sac, but not (employee) NI avoidance. Pensions were exempted, but assuming they're included and subject to the same rules, employees would still save NI using sal sac.

    So could be 42% relief for basic rate taxpayers!
  • Filo25Filo25 Forumite
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    If anything does happen on pensions, given it is intended to be a revenue raising measure I doubt we are going to see 30% for all, maybe 25% ttops, but more likely just ot make it less attractive for higher earners while offering nothing new to those on basic rate.
  • zagfleszagfles Forumite
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    Filo25 wrote: »
    If anything does happen on pensions, given it is intended to be a revenue raising measure I doubt we are going to see 30% for all, maybe 25% ttops, but more likely just ot make it less attractive for higher earners while offering nothing new to those on basic rate.
    Don't forget there are loads of other ways the govt will save money if pension conts become a BIK. For instance, tax credits use taxable income (after pension conts deducted), UC works in a similar way, other benefits allow partial deductions for pension conts, assessment for student loans, child ben withdrawal, PA withdrawal etc.

    All these use taxable income as the basis, if taxable income now includes pension conts, both employee and employer, with a flat rebate at around 30%, then there will be savings even from some people on basic rate tax because of the above. Added to the saving from higher rate taxpayers, who obviously contribute more anyway, and 30% is likely to be seriously fisally positive from the govt's POV.
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