ex-pat_scot wrote: »
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!
zagfles wrote: »
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.
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.
woolly_wombat wrote: »
I believe the tax system in the 1970s used to positively encourage that approach. I can vaguely remember my Dad telling me that there were strict annual limits on pension contributions, based on an annual % of earnings. The % increased with age. It was explained to me because I wasn't eligible for a full student grant and he couldn't afford to top it up and pay the maximum into his pension! (I still feel very lucky in comparison to today's students).
It's worth remembering how much can change over time in terms of pensions and tax relief.
ex-pat_scot wrote: »
Interesting angle and a general change in sentiment.
In the previous discussions on flat rate relief (2016?), the principle of tax neutrality was central to the discussion.
Now the mood is "tax raising, by targeting the unfair higher rate relief that the government gives disproportionately to the better-off".
As an employee, there are very few ways of managing your tax, apart from
- pensions contributions
- charitable gifting
- childcare vouchers
- bike scheme.
Of these, only pensions can make a significant effect on the "unfair" marginal tax bands/ rates.
Benefits, credits, child benefit, free school meals, poverty thresholds (definition), personal allowances etc are all driven by "taxable income" figure.
Recognising pensions and other salsac type deductions as part of "taxable income" will hit the lowest paid the hardest. As a result, the headline would be to have to significantly enhance some welfare / benefits, which is not the kind of thing a Conservative government would probably want.
The consequence, largely unanticipated, is that taxpayer behaviour will change. If I can't sal sac down to the £100,000 level by way of pension contribution, then I will reduce my working hours to the same effect.
Thrugelmir wrote: »
Just leave the various annual pension contribution limits as they are. Then inflation will do the heavy lifting. Quietly and without any fuss.
hugheskevi wrote: »
The table below shows the salary at which a reduced Annual Allowance would be breached in the career average pension schemes of the main public service pension schemes.Salary at which a reduced Annual Allowance would be breached
With an Annual Allowance of £20,000, huge numbers of public sector workers would routinely breach the Allowance. A Civil Servant earning £54,000 p/a would have a tax charge to pay. It might take a few years to exhaust carry-forward, but then there would be a tax charge every year, despite earning below the Child Benefit taper level.
The figures are a best-case scenario. The threshold salary values would routinely be lower than this if, for example:The member has above-CPI in-service revaluation of past career-average service (NHS and Teachers' Scheme)
The member has final-salary linked past service which has increased by more than CPI
The member is making external pension contributions, eg, to a personal pension
The member is making extra pension contributions, eg, Added Pension, Added Years, AVCs
The member has external income and is subject to the tapered Annual Allowance.
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