FT - Tories to raid tax relief pensions

MK62

That's 70% of company pension schemes........what about the other 30%, the self employed, the low paid, just about every SIPP......and so on?

CSL0183

MK62 said:

That's 70% of company pension schemes........what about the other 30%, the self employed, the low paid, just about every SIPP......and so on?

Not forgetting the DB schemes too which are not salary sacrificed (I don’t believe anyway) Although I’m not sure if these would be included in these statistics anyway as they are different type of pension schemes. 

There are of course small businesses and SE that won’t be factored in but the majority of companies with employees will use a SS scheme. (If not, the financial directors doing the accounts need to go back to school)

MK62

If the benefit is not universally available, either by design or in practice, then it creates a distortion in the system.........are you saying it's fair that two workers on the same salary, with the same take home pay then have radically different pension contributions based purely on the way their pension contributions are paid in?

CSL0183

MK62 said:

If the benefit is not universally available, either by design or in practice, then it creates a distortion in the system.........are you saying it's fair that two workers on the same salary, with the same take home pay then have radically different pension contributions based purely on the way their pension contributions are paid in?

No arguments there. Fully agree. 

michaels

Look at this from the govt point of view and 5 year time horizon.

If you do something that means higher earners use ISAs/LISAs rather than pension contributions to save for retirement you move a lot of tax forward to now from pension receipt time which looks brilliant from a psbr perspective and allows a lot more spending now. Sure you get less tax as people spend from their ISAs in retirement but that is several parliaments down the road before it is material.

michaels

I use sal sac to my pension,makes up for the unfairness that is:

1) although I am not yet 50 I have the maximum state benefit entitlement so none of the NI I pay will increase my state pension
2) with one higher earner and one non earner we would otherwise lose all our child benefit whereas other households earning 66% more can keep all their child benefit

michaels

The larger curve is the elephant in the room. Currently the different tax rates and lifetime/annual allowances are pushing some higher earners to work part time or retire early to avoid very high marginal rates which is very inefficient for both the economy and the total tax take.

Any solution needs to avoid these sort of high marginal rate cliff edges that simply deter working and thus reduce tax take. This might well need higher 'base' taxation from lower levels of income to allow for less punitive tax rate ranges to avoid the economic distortion they bring.

MK62

michaels said:

I use sal sac to my pension,makes up for the unfairness that is:

1) although I am not yet 50 I have the maximum state benefit entitlement so none of the NI I pay will increase my state pension
2) with one higher earner and one non earner we would otherwise lose all our child benefit whereas other households earning 66% more can keep all their child benefit

No dispute over other these other anomalies, but they are not linked.......someone could easily be in the same position as you on those counts but have no access to a salary sacrifice pension scheme.....

MK62

michaels said:

The larger curve is the elephant in the room. Currently the different tax rates and lifetime/annual allowances are pushing some higher earners to work part time or retire early to avoid very high marginal rates which is very inefficient for both the economy and the total tax take.

Any solution needs to avoid these sort of high marginal rate cliff edges that simply deter working and thus reduce tax take. This might well need higher 'base' taxation from lower levels of income to allow for less punitive tax rate ranges to avoid the economic distortion they bring.

Agreed about trying to eliminate as many distortions/anomalies as possible, but increasing taxes on the lower paid, to make life easier for higher earners, would be a very tough sell in today's political climate.......

SonOf

I would not be surprised if salary sacrifice (on pensions) is looked at soon.  It used to be used very little and was a negligible cost to the treasury.  Now it is available with most workplace schemes.    Employer contributions have doubled since 2010 and are tenfold since 1999
Individual pension contributions peaked in 2007/8 and declined to a low in 2012/13 before being relatively stable ever since.  Self employed pensions have been in decline/stable annually since 2001.   Employer contributions have increased significantly and now account for 66% of all pension contributions compared to 19% in 2001.