FT - Tories to raid tax relief pensions

zagfles

CSL0183 said:

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.

Anyone whining about fairness or unfairness is missing the point. The tax system is not fair and never has been. It might pretend to be to fool the gullible.

The point is that Boris has promised a bit of a spending splurge, so will probably need to raise the tax take. But he's promised not to raise income tax rates, NI rates, or VAT rates and he's even promised to cut NI (increasing the primary threshold).

There's also a few pension anomilies he's promised to sort such as the AA taper affecting the NHS and the "net pay trap" for low earners.

A flat rate relief combined with changing or even abolishing the AA & LTA could solve all these problems and also raise taxes at the same time. Win-win for the government. Unless it results in negative behaviour (in a fiscal sense). Some people think this might happen, as discussed above, but personally I think it'll be fiscally positive from the govt's POV. It would shift incentives to save in a pension from those on higher incomes, who are unlikely to be a drain on the state in terms of welfare etc, to lower earners, who might otherwise be. It might cause a few higher earners to work less (as it's not worth it), equally it could cause some to work more (can't afford to retire as early). In the case of doctors and the AA taper, plus LTA, it was a massively high effective tax rate, close to 100% or more in some cases, so the former clearly applied.

With say a flat rate relief of 25% a HRT payer would usually have an effective tax rate of 30% for money into a pension (15% tax now, 15% later), so it's a completely different equation. Getting to keep 70% of what you earn is unlikely to be a huge disincentive, it's better than most people get now outside pensions and doesn't seem to make people think it's not worth working.

ffacoffipawb

zagfles said:

CSL0183 said:

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.

Anyone whining about fairness or unfairness is missing the point. The tax system is not fair and never has been. It might pretend to be to fool the gullible.

The point is that Boris has promised a bit of a spending splurge, so will probably need to raise the tax take. But he's promised not to raise income tax rates, NI rates, or VAT rates and he's even promised to cut NI (increasing the primary threshold).

There's also a few pension anomilies he's promised to sort such as the AA taper affecting the NHS and the "net pay trap" for low earners.

A flat rate relief combined with changing or even abolishing the AA & LTA could solve all these problems and also raise taxes at the same time. Win-win for the government. Unless it results in negative behaviour (in a fiscal sense). Some people think this might happen, as discussed above, but personally I think it'll be fiscally positive from the govt's POV. It would shift incentives to save in a pension from those on higher incomes, who are unlikely to be a drain on the state in terms of welfare etc, to lower earners, who might otherwise be. It might cause a few higher earners to work less (as it's not worth it), equally it could cause some to work more (can't afford to retire as early). In the case of doctors and the AA taper, plus LTA, it was a massively high effective tax rate, close to 100% or more in some cases, so the former clearly applied.

With say a flat rate relief of 25% a HRT payer would usually have an effective tax rate of 30% for money into a pension (15% tax now, 15% later), so it's a completely different equation. Getting to keep 70% of what you earn is unlikely to be a huge disincentive, it's better than most people get now outside pensions and doesn't seem to make people think it's not worth working.

I was in disagreement with you on this issue. Having read the above, I am on the same page now.

kinger101

zagfles said:

CSL0183 said:

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.

Anyone whining about fairness or unfairness is missing the point. The tax system is not fair and never has been. It might pretend to be to fool the gullible.

The point is that Boris has promised a bit of a spending splurge, so will probably need to raise the tax take. But he's promised not to raise income tax rates, NI rates, or VAT rates and he's even promised to cut NI (increasing the primary threshold).

There's also a few pension anomilies he's promised to sort such as the AA taper affecting the NHS and the "net pay trap" for low earners.

A flat rate relief combined with changing or even abolishing the AA & LTA could solve all these problems and also raise taxes at the same time. Win-win for the government. Unless it results in negative behaviour (in a fiscal sense). Some people think this might happen, as discussed above, but personally I think it'll be fiscally positive from the govt's POV. It would shift incentives to save in a pension from those on higher incomes, who are unlikely to be a drain on the state in terms of welfare etc, to lower earners, who might otherwise be. It might cause a few higher earners to work less (as it's not worth it), equally it could cause some to work more (can't afford to retire as early). In the case of doctors and the AA taper, plus LTA, it was a massively high effective tax rate, close to 100% or more in some cases, so the former clearly applied.

With say a flat rate relief of 25% a HRT payer would usually have an effective tax rate of 30% for money into a pension (15% tax now, 15% later), so it's a completely different equation. Getting to keep 70% of what you earn is unlikely to be a huge disincentive, it's better than most people get now outside pensions and doesn't seem to make people think it's not worth working.

It's sounding more like this is being kicked into the long grass, but this time round, it was touted as a way as increasing government revenue, rather than giving better incentrives to BR taxpayers to put more in their pensions.  Can't see it raising £10B if the flat rate of 25% had been introduced.

BobQ

People need to appreciate that we are speaking about tax relief. There is no right to have tax relief on pension contributions, it is a benefit of the tax system that can be removed or be as fair  or as unfair as the Treasury wants.

What amuses me is these 40% tax papers wingeing about losing tax relief were the same type of people who complained about the more modest actions of Mr G Brown.

DairyQueen

zagfles said:

It's swapping a migrane experinecd by a few, crucial people like doctors, to a slight headache experienced by a greater number. For most, it'll make no difference to their behaviour. For a few, you might be right, but equally others may delay their retirement as it means they can't afford to retire for another year or 2. Only a fool would stop pension contributions completely just because higher rate relief had gone, unless they expecting to pay higher rate tax in retirement in which case they'd currently likely be hit by the LTA anyway. The incentive would be the same as it currently is for basic rate payers. And if they did, why would the govt care? Unlikely many would end up relying on welfare in retirement.

Excellent. Give younger age groups who pay/may pay HRT another stick to beat-up boomers.

"T'aint fair. They received relief at a higher rate than us and for all of those decades".

Pass the paracetamol. I have a headache just thinking about it.

zagfles

DairyQueen said:

zagfles said:

It's swapping a migrane experinecd by a few, crucial people like doctors, to a slight headache experienced by a greater number. For most, it'll make no difference to their behaviour. For a few, you might be right, but equally others may delay their retirement as it means they can't afford to retire for another year or 2. Only a fool would stop pension contributions completely just because higher rate relief had gone, unless they expecting to pay higher rate tax in retirement in which case they'd currently likely be hit by the LTA anyway. The incentive would be the same as it currently is for basic rate payers. And if they did, why would the govt care? Unlikely many would end up relying on welfare in retirement.

Excellent. Give younger age groups who pay/may pay HRT another stick to beat-up boomers.

"T'aint fair. They received relief at a higher rate than us and for all of those decades".

Pass the paracetamol. I have a headache just thinking about it.

Given that only about 15% of taxpayers pay higher rate tax, and even less amongst "younger" groups, a flat rate relief set at somewhere between the basic rate and higher rate would mean the vast majority would get more tax relief not less.

zagfles

BobQ said:

People need to appreciate that we are speaking about tax relief. There is no right to have tax relief on pension contributions, it is a benefit of the tax system that can be removed or be as fair  or as unfair as the Treasury wants.

What amuses me is these 40% tax papers wingeing about losing tax relief were the same type of people who complained about the more modest actions of Mr G Brown.

I don't get what's "amusing" about that, perhaps you could explain? It's not like there's some contradiction between the two.

zagfles

kinger101 said:

zagfles said:

CSL0183 said:

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.

Anyone whining about fairness or unfairness is missing the point. The tax system is not fair and never has been. It might pretend to be to fool the gullible.

The point is that Boris has promised a bit of a spending splurge, so will probably need to raise the tax take. But he's promised not to raise income tax rates, NI rates, or VAT rates and he's even promised to cut NI (increasing the primary threshold).

There's also a few pension anomilies he's promised to sort such as the AA taper affecting the NHS and the "net pay trap" for low earners.

A flat rate relief combined with changing or even abolishing the AA & LTA could solve all these problems and also raise taxes at the same time. Win-win for the government. Unless it results in negative behaviour (in a fiscal sense). Some people think this might happen, as discussed above, but personally I think it'll be fiscally positive from the govt's POV. It would shift incentives to save in a pension from those on higher incomes, who are unlikely to be a drain on the state in terms of welfare etc, to lower earners, who might otherwise be. It might cause a few higher earners to work less (as it's not worth it), equally it could cause some to work more (can't afford to retire as early). In the case of doctors and the AA taper, plus LTA, it was a massively high effective tax rate, close to 100% or more in some cases, so the former clearly applied.

With say a flat rate relief of 25% a HRT payer would usually have an effective tax rate of 30% for money into a pension (15% tax now, 15% later), so it's a completely different equation. Getting to keep 70% of what you earn is unlikely to be a huge disincentive, it's better than most people get now outside pensions and doesn't seem to make people think it's not worth working.

It's sounding more like this is being kicked into the long grass, but this time round, it was touted as a way as increasing government revenue, rather than giving better incentrives to BR taxpayers to put more in their pensions.  Can't see it raising £10B if the flat rate of 25% had been introduced.

I've seen analyses suggesting 30-33% is fiscally neutral - maybe surprising but higher rate taxpayers are in general are putting a lot more into pensions than basic rate taxpayers, also there are knock on effects of pension contributions not reducing taxable income (eg benefits, tax credits, student loans etc).

Depends how it's done of course. But 25% it seems would certainly raise significant revenue.

ffacoffipawb

Quid pro quo. No higher rate tax relief going in so no higher rate tax payable on pension income on the way out either then?

zagfles

ffacoffipawb said:

Quid pro quo. No higher rate tax relief going in so no higher rate tax payable on pension income on the way out either then?

Nope. As I said earlier, that tax penalty nicely replicates the LTA, meaning the LTA could be abolished.

Currently, you get 40% relief and if you pay higher rate tax in retirement you've almost certainly blown the LTA, so pay 55% on the way out. Replaced by 25% relief and 40% on the way out. Same 15% tax penalty.