FT - Tories to raid tax relief pensions

Mick70

Notice front page of FT says that there are plans to cut back tax relief on pension contributions which would impact all 40% tax payers .  I can’t access the full article to read it in depth and see the exact proposals, but other posters may be able to ?
mick 

marlot

It may not be all bad news.  If it were combined with an abolition of the annual allowance, it might make things a LOT simpler!

JoeCrystal

The article summarises that by cutting the pension tax relief to 20% will raise £10 billion. The Treasury is only looking at the measures to increase the revenues and have not made any decision yet. You see, the Chancellor may be concerned about fierce backlash from the traditional Tory voters. Either way, I don't have a problem with this plan.

OldBeanz

There does appear to be an anomaly in the system where 2 parents with £90K salaries can salary sacrifice to load their pensions, lessen their NI contributions and regain child benefits while someone on £12k gets no tax incentive through their works pension.
An annual contribution limit of approximately 30% more than the average salary appears appropriate.
A limit to the size of the pot needs resolved as growth can do this but the trade off should be a limit to the amount which can be inherited tax free.
Salary sacrifice cannot be done in the gig economy for people working more than one job when the jobs combined would take them well over the limit.
Any system that sorts this out gets a vote from me.

Aretnap

You can read the article online for free if you find it via Google

https://www.google.com/search?q=financial+times+pension+tax+relief&oq=financial+Times+pension&aqs=chrome.3.69i57j0l3.8267j0j4&client=ms-android-huawei&sourceid=chrome-mobile&ie=UTF-8

Basically it says the chancellor is *considering* scrapping higher rate tax relief on pensions - as every chancellor has considered doing before every budget in about the last 30 years. (You can pretty much set your calendar by the appearance of these news stories). It has never actually happened because while it would raise a lot of money, there would be technical challenges in the detail and significant policitical cost. 

As the government has a big majority and is desperate to raise some cash that it can throw around in the North and pretend is a Brexit dividend, maybe this year it will actually happen. Or maybe it won't. In any event I'm sure the pension companies will bombard us with warnings over the next few months that it's our last chance to claim higher rate tax relief and we'd better make big contributions while we still can. Just like they've done every year for the last 30.

martinthebandit

However it's done it's hardly raiding pensions.

but hey a scaremongering headline is not particularly surprising from the OP

MK62

Every budget brings debate on this, but nothing ever happens......will it be different this time?..
Personally I think reform is long overdue, as is the current system of salary sacrifice for pensions........however, it's something of a minefield, so changes do need to be considered carefully beforehand to avoid unintended consequences as far as reasonably possible.
I don't agree with the guy from the IFS, at least in the face of it anyway, who suggested abolition of the tax free lump sum would be a better reform.......though the article did not expand on his reasoning.

Filo25

It would basically make unmatched pension contributions a waste of time for higher earners

Tax relief at 20% on the way in and almost certainly a big enough pot to be taxed at 15% on the way out (and that is assuming the tfls survives to retirement, which I doubt). Not much of an incentive to lock your money away for years/decades, if you aren't getting salary sacrifice benefits.

I would probably be stopping mine.

This is obviously the usual talk in the run up to a budget, but probably more risk of it happening this time, govt has a big majority to force unpopular stuff through, it needs to find cash to pay for "stuff" in it's new northern and Midlands seats, it knows Labour arent exactly an attractive opposition for higher earners, so who else will they vote for and they likely won't face an election until 2024 and voters have short memories!

cfw1994

I’ve often wondered if there is a middle ground to this: give tax relief at 30% to ALL.
Those on 20% tax get a big benefit to encourage them to save more.
HRT only lose half their ‘bonus gains’ they currently enjoy.
I do think they need to raise (perhaps remove?) the LTA: far more will slip towards that in the future, and it is shaping my plans to give up work: advantage to me, but perhaps a disadvantage to employers....
Thoughts?

Dazed_and_C0nfused

Same thing has been brought up before every budget for years and years. 

Nothing ever changes re how the tax relief works for the vast majority. 

Not even when Labour, who were far more likely to limit the additional tax relief higher earners can benefit from, were in power.

I think changes to the lower earners issue where some (most?) of those very low earners in net pay schemes don't benefit from tax relief compared to those who can make contributions under the relief at source provisions and get full tax relief is more likely.

MK62

Really can't see 30% tax relief for all getting much traction tbh - the government have a few spending pledges to service, so any changes will most likely involve a sizeable saving to the exchequer imho.....a smaller increase might be a go though.
I wouldn't expect hrt payers to be in favour of course, but a large chunk of pension tax relief is taken by higher rate taxpayers, and removal of that tax benefit would probably not be too difficult politically, especially if it came bundled with a sweetener.
Likewise, the restriction to NI avoidance schemes, such as salary sacrifice for pensions, would also be unlikely to be politically difficult........easily sellable as just levelling the playing field for everyone.

The AA and LTA are in need of a little tinkering too....😉