FT - Tories to raid tax relief pensions

Anonymous101

MK62 said:

I agreed, especially on pensions! Few people at work often say that they cannot afford the pension contribution of £40 per month. I try to explain it will be like taking a pay cut and that by paying £40 per month take-home pay, it becomes £80 per month gross thanks to the tax relief and employer contributions, but they are not interested and much rather see that extra cash in their pocket.

True, and when it's then further pointed out that the £40pm from their salary, even doubled by relief and ER contribution, will actually buy a pittance pension come retirement, many just shrug and say "what's the point then"?

On one level I empathise, but on the other level I do think that is shouldn't be a surprise that £40pm, perhaps say £100 once grossed up, doesn't amount to much. At the simplest level £1200 pa x 35 years = £42k contributions. I know you can't ignore the growth but what do people expect to get from this level of contribution? How people can expect to put in £1200 a year and then take 10 or 20 times that out ever year for almost as long... it just doesn't stack up logically. 

LHW99

Sailtheworld said:

I've been a higher rate taxpayer for 20 years. I'm pretty sure that for every budget of those years there has been speculation that higher rate relief was definitely being withdrawn. You can imagine my surprise when it turned out that, as per the previous two decades, it's not going to happen this year either.

It's ruse used every year to try and justify an increase in taxes elsewhere. It seems this year taxes on petrol will increase to pay for the retention of the relief. Doesn't anyone ever wonder why, when one tax remains the same, another tax needs to increase to compensate?

But an increase in fuel duty is simple, and difficult to evade. Changing pension tax reliefs is likely to cause more complexity and increase the numbers of those trying to find a way around it.

MK62

They've removed higher rate relief from quite a few things over the years, and in many cases basic rate relief as well........it's just that pensions is a much bigger nettle to grasp, especially on top of all the other changes made in this area over the last few years.
I would also be very surprised if anything happened for next tax year on this, but I wouldn't be surprised if a review/consultation about it all was announced. Personally I doubt that any measures, if any end up being taken, would simply amount to removal of HR relief alone.....they'd also have to look again at other current measures too, AA taper, LTA, PA taper and so on, and perhaps something to sweeten the pill, like an increase in BR relief, or some kind of bonus (perhaps extend LISA eligibility) etc.

For the spending promised, the money will have to come from somewhere..........raising fuel duty alone won't cover it....won't even come close.

Sailtheworld

LHW99 said:

Sailtheworld said:

I've been a higher rate taxpayer for 20 years. I'm pretty sure that for every budget of those years there has been speculation that higher rate relief was definitely being withdrawn. You can imagine my surprise when it turned out that, as per the previous two decades, it's not going to happen this year either.

It's ruse used every year to try and justify an increase in taxes elsewhere. It seems this year taxes on petrol will increase to pay for the retention of the relief. Doesn't anyone ever wonder why, when one tax remains the same, another tax needs to increase to compensate?

But an increase in fuel duty is simple, and difficult to evade. Changing pension tax reliefs is likely to cause more complexity and increase the numbers of those trying to find a way around it.

You've missed the point a bit but you're very much not alone.

Why does fuel duty need to increase to compensate for pension tax relief not changing? If one tax stays the same and another one increases that's an increase in tax take.

The whole language around tax reliefs on pensions is framed (by the government) as being a cost that needs to be made up for. It's (not so) strange that the data is always expressed as gross tax relief rather than a net figure (tax relief for those paying in subtract tax paid by those taking out).

It's as if I'm meant to be grateful that pensions can be funded with my own money that the government hasn't had a slice of first.

badmemory

Anonymous101 said:

MK62 said:

I agreed, especially on pensions! Few people at work often say that they cannot afford the pension contribution of £40 per month. I try to explain it will be like taking a pay cut and that by paying £40 per month take-home pay, it becomes £80 per month gross thanks to the tax relief and employer contributions, but they are not interested and much rather see that extra cash in their pocket.

True, and when it's then further pointed out that the £40pm from their salary, even doubled by relief and ER contribution, will actually buy a pittance pension come retirement, many just shrug and say "what's the point then"?

On one level I empathise, but on the other level I do think that is shouldn't be a surprise that £40pm, perhaps say £100 once grossed up, doesn't amount to much. At the simplest level £1200 pa x 35 years = £42k contributions. I know you can't ignore the growth but what do people expect to get from this level of contribution? How people can expect to put in £1200 a year and then take 10 or 20 times that out ever year for almost as long... it just doesn't stack up logically. 

The excuse for this being acceptable is that they must have been low earners so a minute personal pension plus the state pension will easily be enough to live (exist) on.

michaels

Anonymous101 said:

MK62 said:

I agreed, especially on pensions! Few people at work often say that they cannot afford the pension contribution of £40 per month. I try to explain it will be like taking a pay cut and that by paying £40 per month take-home pay, it becomes £80 per month gross thanks to the tax relief and employer contributions, but they are not interested and much rather see that extra cash in their pocket.

True, and when it's then further pointed out that the £40pm from their salary, even doubled by relief and ER contribution, will actually buy a pittance pension come retirement, many just shrug and say "what's the point then"?

On one level I empathise, but on the other level I do think that is shouldn't be a surprise that £40pm, perhaps say £100 once grossed up, doesn't amount to much. At the simplest level £1200 pa x 35 years = £42k contributions. I know you can't ignore the growth but what do people expect to get from this level of contribution? How people can expect to put in £1200 a year and then take 10 or 20 times that out ever year for almost as long... it just doesn't stack up logically. 

For me that equals 2 extra years of retirement which has got to be worth giving up £40pm for - no?

Paul_Herring

For me that equals 2 extra years of retirement which has got to be worth giving up £40pm for - no?

If, and only if, it's 2 extra years (you're more likely to increase what you're drawing out, though. Aren't you? )

If it's simply, and only, 2 years (which is what appears to be being described,) then perhaps not so much...

LHW99

Sailtheworld said:

LHW99 said:

Sailtheworld said:

I've been a higher rate taxpayer for 20 years. I'm pretty sure that for every budget of those years there has been speculation that higher rate relief was definitely being withdrawn. You can imagine my surprise when it turned out that, as per the previous two decades, it's not going to happen this year either.

It's ruse used every year to try and justify an increase in taxes elsewhere. It seems this year taxes on petrol will increase to pay for the retention of the relief. Doesn't anyone ever wonder why, when one tax remains the same, another tax needs to increase to compensate?

But an increase in fuel duty is simple, and difficult to evade. Changing pension tax reliefs is likely to cause more complexity and increase the numbers of those trying to find a way around it.

You've missed the point a bit but you're very much not alone.

Why does fuel duty need to increase to compensate for pension tax relief not changing? If one tax stays the same and another one increases that's an increase in tax take.

The whole language around tax reliefs on pensions is framed (by the government) as being a cost that needs to be made up for. It's (not so) strange that the data is always expressed as gross tax relief rather than a net figure (tax relief for those paying in subtract tax paid by those taking out).

It's as if I'm meant to be grateful that pensions can be funded with my own money that the government hasn't had a slice of first.

My point was rather that (at the moment) both fuel duty and HR relief are media by-lines without actual confirmation.

Something has to increase in order to pay for what is promised / needed. Borrowing will be one part no doubt, but there would have to also be an increase in tax(es) alongside it.

My comment was intended to suggest that if HR relief changes won't be implemented, then another means of raising money will - and fuel duty hasn't been put up for a while, so is very likely to be an easy option

CSL0183

To the people complaining about HRT relief as being unfair to BRT payers, genuine question, why should HRT payers have to pay 40% on a portion of their income whilst basic rate have to pay only 20%?
% of salary in itself is progressive. Someone on £100k pays a hell of a lot more tax at 20% than someone on £50k paying 20% or someone on £25k or £15k paying 20%. The only reason for HRT relief on pensions is because that person is paying HRT in the first place. They are not being rewarded or favouritised by the Government. 

It's only unfair to BRT payers because they see something that they are not getting. I even heard one idiot say give BRT payers 40% relief and HRT payers 20%. That is nothing but sheer jealousy and goes against all common logic.

And those whining about HRT and the proposed 20% flat rate are themselves cutting their nose off to spite their face as the majority of BRT payers will enjoy 32/33% relief through salary sacrifice. The real difference between HRT and BRT relief is a mere 10% in real terms.
If you are not happy about Pension relief, work your way up the ladder like all HRT payers have had to do and earn enough to pay HRT in the first place. There even seems to be jealousy amongst some BRT payers in here. Those that get a flat 20% and those that SS at 32%.

Incredible.

GunJack

Make sal sac compulsory and limit relief for other schemes to 20%... how would that work out overall??