FT - Tories to raid tax relief pensions

kinger101

zagfles said:

CSL0183 said:

zagfles said:

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.

That's simply not true though as you are disregarding the fact that the majority of basic rate taxpayers currently get 32-33% tax relief through salary sacrifce (75% of all private pensions use SS)

The difference between basic rate and higher rate is only 10% under a SS scheme, not 20% that is continually referenced. Dont touch something that isn't broken, a flat rate of 20/25 or even 30 would still penalise millions of basic rate tax payers currently enjoying 32/33% relief.

Perhaps make all private pension payments salary sacrifice so everyone receives 32/33% or 42/43% relief. Public sector FS/CARE type pensions could possibly keep the same reliefs as they are a lot more generous and this evens up the field.

Why are you assuming sal sac or the NI "relief" of pensions would change? This thread is about tax relief, no-one has proposed any changes to the current NI relief position. Even if the govt went for the "pure" option of making employer pension contributions a taxable benefit with a flat "tax relief" top up, sal sac would still save NI in exactly the same way it does now.

I currently use sal sac for a couple of taxable BIKs (benefits in kind), and because I sacrifice salary in return for a benefit of the same value I don't save any tax, since I'm taxed on the BIK instead of the money, but I do save NI, because employees don't pay NI on BIKs. So no reason the same wouldn't apply to pensions.

National insurance is a tax.  In fact, in respect to pensions, unlike income tax, it is one from which there is true "relief" as pensions are subject to income tax but not NI when income is drawn.  If salary sacrifice isn't changed, it leaves a massive loophole, and creates further inequalities in the pension system.  

zagfles

kinger101 said:

zagfles said:

CSL0183 said:

zagfles said:

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.

That's simply not true though as you are disregarding the fact that the majority of basic rate taxpayers currently get 32-33% tax relief through salary sacrifce (75% of all private pensions use SS)

The difference between basic rate and higher rate is only 10% under a SS scheme, not 20% that is continually referenced. Dont touch something that isn't broken, a flat rate of 20/25 or even 30 would still penalise millions of basic rate tax payers currently enjoying 32/33% relief.

Perhaps make all private pension payments salary sacrifice so everyone receives 32/33% or 42/43% relief. Public sector FS/CARE type pensions could possibly keep the same reliefs as they are a lot more generous and this evens up the field.

Why are you assuming sal sac or the NI "relief" of pensions would change? This thread is about tax relief, no-one has proposed any changes to the current NI relief position. Even if the govt went for the "pure" option of making employer pension contributions a taxable benefit with a flat "tax relief" top up, sal sac would still save NI in exactly the same way it does now.

I currently use sal sac for a couple of taxable BIKs (benefits in kind), and because I sacrifice salary in return for a benefit of the same value I don't save any tax, since I'm taxed on the BIK instead of the money, but I do save NI, because employees don't pay NI on BIKs. So no reason the same wouldn't apply to pensions.

National insurance is a tax.  In fact, in respect to pensions, unlike income tax, it is one from which there is true "relief" as pensions are subject to income tax but not NI when income is drawn.  If salary sacrifice isn't changed, it leaves a massive loophole, and creates further inequalities in the pension system.  

You're not getting it. Sal sac is already here, it's already used for far more than just pensions, it's a known loophole which the govt have already cracked down on to some extent a couple of years ago. But what they didn't touch was the employee NI savings from sal sac.

This thread is discussing changes to the tax relief system (not NI relief). Under a flat rate relief system, employer pension conts are obviously an issue. Two obvious solutions - make them a taxable benefit (with a separate "tax relief" top up), or allow a limited employer contribution above which it becomes a taxable BIK. Sal sac conts are obviously included in employer conts.

But either way, employee NI relief would still apply to sal sac contributions in exactly the same way as it does now.

Of course they could mess with NI relief as well, but that'll make any changes far to complicated...

Anonymous101

Paul_Herring said:

cloud_dog said:

5 years works for me 

Ah - indeed; ditto

Funnily enough 5 years is great for me too.... Shame we're not advising!

Anonymous101

zagfles said:

But either way, employee NI relief would still apply to sal sac contributions in exactly the same way as it does now.

Of course they could mess with NI relief as well, but that'll make any changes far to complicated...

This makes any changes hugely problematic IMO. If it were the case that the tax relief changes but not the NI relief I'd consider front loading my contributions to take advantage of the monthly NI calculation and annual tax calculation differences.

zagfles

Anonymous101 said:

zagfles said:

But either way, employee NI relief would still apply to sal sac contributions in exactly the same way as it does now.

Of course they could mess with NI relief as well, but that'll make any changes far to complicated...

This makes any changes hugely problematic IMO. If it were the case that the tax relief changes but not the NI relief I'd consider front loading my contributions to take advantage of the monthly NI calculation and annual tax calculation differences.

You mean you don't already? People here have been doing that that for years!

kinger101

zagfles said:

kinger101 said:

zagfles said:

CSL0183 said:

zagfles said:

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.

That's simply not true though as you are disregarding the fact that the majority of basic rate taxpayers currently get 32-33% tax relief through salary sacrifce (75% of all private pensions use SS)

The difference between basic rate and higher rate is only 10% under a SS scheme, not 20% that is continually referenced. Dont touch something that isn't broken, a flat rate of 20/25 or even 30 would still penalise millions of basic rate tax payers currently enjoying 32/33% relief.

Perhaps make all private pension payments salary sacrifice so everyone receives 32/33% or 42/43% relief. Public sector FS/CARE type pensions could possibly keep the same reliefs as they are a lot more generous and this evens up the field.

Why are you assuming sal sac or the NI "relief" of pensions would change? This thread is about tax relief, no-one has proposed any changes to the current NI relief position. Even if the govt went for the "pure" option of making employer pension contributions a taxable benefit with a flat "tax relief" top up, sal sac would still save NI in exactly the same way it does now.

I currently use sal sac for a couple of taxable BIKs (benefits in kind), and because I sacrifice salary in return for a benefit of the same value I don't save any tax, since I'm taxed on the BIK instead of the money, but I do save NI, because employees don't pay NI on BIKs. So no reason the same wouldn't apply to pensions.

National insurance is a tax.  In fact, in respect to pensions, unlike income tax, it is one from which there is true "relief" as pensions are subject to income tax but not NI when income is drawn.  If salary sacrifice isn't changed, it leaves a massive loophole, and creates further inequalities in the pension system.  

You're not getting it. Sal sac is already here, it's already used for far more than just pensions, it's a known loophole which the govt have already cracked down on to some extent a couple of years ago. But what they didn't touch was the employee NI savings from sal sac.

This thread is discussing changes to the tax relief system. Under a flat rate relief system, employer pension conts are obviously an issue. Two obvious solutions - limit employer pension conts (which would obviously include sal sac contributions), or make them a taxable benefit.

But either way, employee NI relief would still apply to sal sac contributions.

Thanks for the condescending post.  Like I said, national insurance IS tax.  The interaction between NI, income tax and salary sacrifice cannot be considered in isolation.  Neither can the fact that a significant minority of employees cannot benefit from SS.  The complexities of changing the system became apparent years ago when GO first touted altering the relief.  Partly why it wasn't implemented then.  It's not that "I'm not getting it", more that your plans don't necessarily stand up to scrutiny.

Anonymous101

zagfles said:

Anonymous101 said:

zagfles said:

But either way, employee NI relief would still apply to sal sac contributions in exactly the same way as it does now.

Of course they could mess with NI relief as well, but that'll make any changes far to complicated...

This makes any changes hugely problematic IMO. If it were the case that the tax relief changes but not the NI relief I'd consider front loading my contributions to take advantage of the monthly NI calculation and annual tax calculation differences.

You mean you don't already? People here have been doing that that for years!

Not yet. I'm (only) in my mid 30's and I've not really been in a position to prior to this last year or two but I'm thinking I will for next year regardless of any budget announcements.

zagfles

kinger101 said:

zagfles said:

kinger101 said:

zagfles said:

CSL0183 said:

zagfles said:

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.

That's simply not true though as you are disregarding the fact that the majority of basic rate taxpayers currently get 32-33% tax relief through salary sacrifce (75% of all private pensions use SS)

The difference between basic rate and higher rate is only 10% under a SS scheme, not 20% that is continually referenced. Dont touch something that isn't broken, a flat rate of 20/25 or even 30 would still penalise millions of basic rate tax payers currently enjoying 32/33% relief.

Perhaps make all private pension payments salary sacrifice so everyone receives 32/33% or 42/43% relief. Public sector FS/CARE type pensions could possibly keep the same reliefs as they are a lot more generous and this evens up the field.

Why are you assuming sal sac or the NI "relief" of pensions would change? This thread is about tax relief, no-one has proposed any changes to the current NI relief position. Even if the govt went for the "pure" option of making employer pension contributions a taxable benefit with a flat "tax relief" top up, sal sac would still save NI in exactly the same way it does now.

I currently use sal sac for a couple of taxable BIKs (benefits in kind), and because I sacrifice salary in return for a benefit of the same value I don't save any tax, since I'm taxed on the BIK instead of the money, but I do save NI, because employees don't pay NI on BIKs. So no reason the same wouldn't apply to pensions.

National insurance is a tax.  In fact, in respect to pensions, unlike income tax, it is one from which there is true "relief" as pensions are subject to income tax but not NI when income is drawn.  If salary sacrifice isn't changed, it leaves a massive loophole, and creates further inequalities in the pension system.  

You're not getting it. Sal sac is already here, it's already used for far more than just pensions, it's a known loophole which the govt have already cracked down on to some extent a couple of years ago. But what they didn't touch was the employee NI savings from sal sac.

This thread is discussing changes to the tax relief system. Under a flat rate relief system, employer pension conts are obviously an issue. Two obvious solutions - limit employer pension conts (which would obviously include sal sac contributions), or make them a taxable benefit.

But either way, employee NI relief would still apply to sal sac contributions.

Thanks for the condescending post.  Like I said, national insurance IS tax.  The interaction between NI, income tax and salary sacrifice cannot be considered in isolation.  Neither can the fact that a significant minority of employees cannot benefit from SS.  The complexities of changing the system became apparent years ago when GO first touted altering the relief.  Partly why it wasn't implemented then.  It's not that "I'm not getting it", more that your plans don't necessarily stand up to scrutiny.

I do apologise for saying you're not getting what I've stated time and time again. What I've been discussing only affects income tax, not NI. Employee NI relief on sal sac would not change under a flat rate system where employer pension conts are a taxable benefit, or a taxable benefit above a certain value.

Of course the system could be totally redesigned to make things "fairer", but all I'm talking about here is tweaking the tax relief system, not redesigning the entire tax/NI system.

KCartwright

zagfles said:

Anonymous101 said:

This makes any changes hugely problematic IMO. If it were the case that the tax relief changes but not the NI relief I'd consider front loading my contributions to take advantage of the monthly NI calculation and annual tax calculation differences.

You mean you don't already? People here have been doing that that for years!

Could you elaborate on this one please? What is the benefit? I haven't paid any attention to this ever assuming it would all even out by the year end anyway.

zagfles

Anonymous101 said:

zagfles said:

Anonymous101 said:

zagfles said:

But either way, employee NI relief would still apply to sal sac contributions in exactly the same way as it does now.

Of course they could mess with NI relief as well, but that'll make any changes far to complicated...

This makes any changes hugely problematic IMO. If it were the case that the tax relief changes but not the NI relief I'd consider front loading my contributions to take advantage of the monthly NI calculation and annual tax calculation differences.

You mean you don't already? People here have been doing that that for years!

Not yet. I'm (only) in my mid 30's and I've not really been in a position to prior to this last year or two but I'm thinking I will for next year regardless of any budget announcements.

Yup - again something that wouldn't change under a flat rate system. The plans a few years ago to merge the operation of tax and NI which would have scuppered this seem to have been kicked into the long grass...