Pensions and paying for Covid

zagfles

NedS said:

If they want to axe HRT relief on pensions then presumably they will also need to abolish salary sacrifice too.

It does seem to make sense, as it will only target the more wealthy (higher earners) and will effectively allow the Treasury to collect more income tax without actually raising taxes. Higher earners will lose a tax perk, which will put them back in line with lower earners (basic rate tax payers) whereby saving into a pension is a method of tax deferment rather than tax avoidance.

Also, by keeping the 25% tax free withdraws, everyone retains a small tax benefit.

They could allow limited sal sac, maybe the equivalent of the most generous public sector schemes. The problem with abolishing higher rate relief in a fair way is you then need to make pension conts a taxable benefit, and it wouldn't be good headlines to massively hike taxes on doctors and even some nurses. It would also be incredibly complicated.

So they could allow employers to contribute up to around 35-40% of the employee's taxable pay into a pension (DB schemes using the same rules as for the AA), anything above that being a taxable benefit. This would mean virtually all DB pensions would be within this limit, and to be fair to those not in generous public sector DB schemes, allow sal sac up to that level too (would likely work out to 20-25% salary for those in DC schemes).

Change all employee conts to RAS (would fix the "net pay" anomaly for the low paid), so taxable pay not reduced by employee conts. PCLS could be limited to a much lower value say £50k with a transitional allowance of 25% of current pension value at the date of announcement where higher.

kangoora

It always seemed incongruous to me that the higher paid members of society get to have bigger tax benefits than available to the lower paid who, presumably, need to save more of their income for a comfortable retirement. It's more draconian if you are a very high earner obviously. Similarly with something like child benefit prior to 2013 or free TV licences for over 75's, free bus passes, winter fuel allowance - lots of non-means tested benefits that to a significant number of people are simply a bit of 'extra' spending money as opposed to a benefit they 'need'. When I reach SP age the winter fuel allowance is going to be 'Cool, a bit of extra untaxed spending money" and not even close to "If I don't get the winter fuel allowance I can't afford to keep the heating on"

HRT allowance worked out nicely for me when I was working but always seemed a little weird.

zagfles

kangoora said:

It always seemed incongruous to me that the higher paid members of society get to have bigger tax benefits than available to the lower paid who, presumably, need to save more of their income for a comfortable retirement. It's more draconian if you are a very high earner obviously. Similarly with something like child benefit prior to 2013 or free TV licences for over 75's, free bus passes, winter fuel allowance - lots of non-means tested benefits that to a significant number of people are simply a bit of 'extra' spending money as opposed to a benefit they 'need'. When I reach SP age the winter fuel allowance is going to be 'Cool, a bit of extra untaxed spending money" and not even close to "If I don't get the winter fuel allowance I can't afford to keep the heating on"

HRT allowance worked out nicely for me when I was working but always seemed a little weird.

Because if you withdraw benefits like the WFA, bus passes, TV licence etc with income, then you create high marginal spikes in the effective tax rates, and discourage people saving for a pension. If you want to tax people more who earn more, increase tax rates, which does it in a fair progressive way rather than withdrawing benefits/allowances which is regressive. 

barnstar2077

kangoora said:

It always seemed incongruous to me that the higher paid members of society get to have bigger tax benefits than available to the lower paid who, presumably, need to save more of their income for a comfortable retirement. It's more draconian if you are a very high earner obviously. Similarly with something like child benefit prior to 2013 or free TV licences for over 75's, free bus passes, winter fuel allowance - lots of non-means tested benefits that to a significant number of people are simply a bit of 'extra' spending money as opposed to a benefit they 'need'. When I reach SP age the winter fuel allowance is going to be 'Cool, a bit of extra untaxed spending money" and not even close to "If I don't get the winter fuel allowance I can't afford to keep the heating on"

HRT allowance worked out nicely for me when I was working but always seemed a little weird.

Let us know which charity you decide to gift your winter fuel allowance to! :  )

Silvertabby

barnstar2077 said:

kangoora said:

It always seemed incongruous to me that the higher paid members of society get to have bigger tax benefits than available to the lower paid who, presumably, need to save more of their income for a comfortable retirement. It's more draconian if you are a very high earner obviously. Similarly with something like child benefit prior to 2013 or free TV licences for over 75's, free bus passes, winter fuel allowance - lots of non-means tested benefits that to a significant number of people are simply a bit of 'extra' spending money as opposed to a benefit they 'need'. When I reach SP age the winter fuel allowance is going to be 'Cool, a bit of extra untaxed spending money" and not even close to "If I don't get the winter fuel allowance I can't afford to keep the heating on"

HRT allowance worked out nicely for me when I was working but always seemed a little weird.

Let us know which charity you decide to gift your winter fuel allowance to! :  )

We've never been HRT payers - but we give our winter fuel allowance to 2 family members who need/appreciate it more than we do. 

michaels

I think they could announce they are not doing the 2.5% of the triple lock for this year and next year only although not sure if wage increase swill drop quickly enough for the 2.5% to apply this year anyway.

Albermarle

Yes perhaps, although higher earners are a segment of society who frequently have good accountants to help them invest their money wherever in order to pay the lowest amount of tax. 

I do not really think that the typical type of person paying HRT ,earning say £70/£80K is going to have an accountant . In my experience many are clueless on these subjects .

Otherwise regarding SS , as opposed to HRT tax relief, it is just a loophole to avoid NI that should have been closed years ago ( although admin wise it will now be an issue) 

michaels

Albermarle said:

Yes perhaps, although higher earners are a segment of society who frequently have good accountants to help them invest their money wherever in order to pay the lowest amount of tax. 

I do not really think that the typical type of person paying HRT ,earning say £70/£80K is going to have an accountant . In my experience many are clueless on these subjects .

Otherwise regarding SS , as opposed to HRT tax relief, it is just a loophole to avoid NI that should have been closed years ago ( although admin wise it will now be an issue) 

And of course a major extra perk for those with govt DB pensions

DavePower

Salary sacrifice has become the norm. Can’t believe it’s been allowed to go on for so long. Not only does it make contributions free of tax but NI too!

Albermarle

DavePower said:

Salary sacrifice has become the norm. Can’t believe it’s been allowed to go on for so long. Not only does it make contributions free of tax but NI too!

SS does not affect tax . Even without SS you can get the same tax relief by other means . It is used to avoid NI.