FT - Tories to raid tax relief pensions

Paul_Herring

Filo25 said:

The unknown on this is who was driving all the talk of looking at higher rate tax relief for pensions, was it No10, No11 or both

It's possible it's neither. This sort of discussion about reviewing tax relief on pensions comes around every budget. I wouldn't put it past the papers to be doing it themselves out of habit.

It would only take one hack to do some postulating, for all the others to pick up on it and run with it.

Triumph13

I suspect the talk is usually mainly driven by pension companies trying to panic people into making contributions before the budget.  I fell for it myself in 2016 - although the fact that I was buying in a dip helped persuade me.  Second guessing the budget turned out to be a mistake.  Buying the dip didn't

lisyloo

25% if it is still tax free though (unless they so away with that as well)

Thrugelmir

Filo25 said:

The unknown on this is who was driving all the talk of looking at higher rate tax relief for pensions, was it No10, No11 or both, it doesn't sound like anyone has much insight on that one yet.

If they do want to push ahead with getting rid of HRT relief then without making things hugely complex, I would guess salary sacrifice would end up having to go as well, to avoid that workaround, could  make pensions pretty pointless for a fair few basic rate tax payers as well, especially for those who have enough put away to pretty much guarantee paying tax in retirement.

With the growth of salary sacrifice schemes comes the loss of ERS NIC. A switch to relief on basic rate tax isn't that complex. New Governments always asks their civil servants to report on what if scenarios on a range of topics. The population is ageing unlikely that the status quo can be maintained. 

Filo25

lisyloo said:

25% if it is still tax free though (unless they so away with that as well)

Given the gradual assault on pension benefits over recent years I think you would be very optimistic to assume the 25% tax free amount will survive if you still have a fair while to go to retirement, and HRT relief goes, it would seem to be the next thing on the chopping block after that.

It certainly won't be part of my base assumptions, if HRT relief goes, my priority will be putting into S&S ISAs in future, at least I don't get taxed on the investment growth there. Would put into pension what employer would match (although no doubt now getting taxed on employer contributions as well), anything else stays outside a pension wrapper.

Even if it stays 20% tax relief on the way in and 15% on the way out (assuming NI relief goes away as well), that isn't a big enough incentive for me to lock money away for 15-20 years.

Thrugelmir

Filo25 said:

lisyloo said:

25% if it is still tax free though (unless they so away with that as well)

Given the gradual assault on pension benefits over recent years I think you would be very optimistic to assume the 25% tax free amount will survive if you still have a fair while to go to retirement, and HRT relief goes, it would seem to be the next thing on the chopping block after that.

While there's been some capping. Pensions still enable people to save an adequate amount for a comfortable retirement. Indexation of the annual earnings allowance to CPI would provide some offset to removal of HRT. 

kinger101

Filo25 said:

Even if it stays 20% tax relief on the way in and 15% on the way out (assuming NI relief goes away as well), that isn't a big enough incentive for me to lock money away for 15-20 years.

That would be my worry too.  If I only get BR relief and no NI saving, I might actually fall in a higher tax regime on retirement.  So I'd probably switch to ISAs for everything beyond my employer match.     

Filo25

Thrugelmir said:

Filo25 said:

lisyloo said:

25% if it is still tax free though (unless they so away with that as well)

Given the gradual assault on pension benefits over recent years I think you would be very optimistic to assume the 25% tax free amount will survive if you still have a fair while to go to retirement, and HRT relief goes, it would seem to be the next thing on the chopping block after that.

While there's been some capping. Pensions still enable people to save an adequate amount for a comfortable retirement. Indexation of the annual earnings allowance to CPI would provide some offset to removal of HRT. 

If HRT and NI relief goes, I won't really care what the annual allowance is, I will pay in the 5% which the company will match, so 10% in total anything beyond that isn't interesting to me, even on that I will up having to pay 40% of my and the company's contribution as tax and 2% as NI. I doubt I would be alone amongst HRT payers in no longer making unmatched contributions.

Maybe that would change in the last handful of years pre retirement, particularly after mortgage is paid, when we may max our ISA allowances.

Equally I doubt many basic rate tax payers are going to be affected by the annual allowance as it stands.

Filo25

kinger101 said:

Filo25 said:

Even if it stays 20% tax relief on the way in and 15% on the way out (assuming NI relief goes away as well), that isn't a big enough incentive for me to lock money away for 15-20 years.

That would be my worry too.  If I only get BR relief and no NI saving, I might actually fall in a higher tax regime on retirement.  So I'd probably switch to ISAs for everything beyond my employer match.     

Also if you have quite a bit to go to retirement your prospective investment return could be quite significant, and you will be taxed on that when you withdraw from the pension, on the other hand it is tax free inside an ISA

Thrugelmir

Filo25 said:

Thrugelmir said:

Filo25 said:

lisyloo said:

25% if it is still tax free though (unless they so away with that as well)

Given the gradual assault on pension benefits over recent years I think you would be very optimistic to assume the 25% tax free amount will survive if you still have a fair while to go to retirement, and HRT relief goes, it would seem to be the next thing on the chopping block after that.

While there's been some capping. Pensions still enable people to save an adequate amount for a comfortable retirement. Indexation of the annual earnings allowance to CPI would provide some offset to removal of HRT. 

If HRT and NI relief goes, I won't really care what the annual allowance is, I will pay in the 5% which the company will match, so 10% in total anything beyond that isn't interesting to me, even on that I will up having to pay 40% of my and the company's contribution as tax and 2% as NI. I doubt I would be alone amongst HRT payers in no longer making unmatched contributions.

Maybe that would change in the last handful of years pre retirement, particularly after mortgage is paid, when we may max our ISA allowances.

Equally I doubt many basic rate tax payers are going to be affected by the annual allowance as it stands.

Of course on a personal level HRT would have decisions to make. Doesn't deflect the reasons behind the review. 
I for one was able to add larger lump sums in later life. Once mortgages kids etc were out the way. An increased annual allowance would have been usefull.