Pensions and paying for Covid

NedS

Chaarli said:

I am not sure how the government could outlaw salary sacrifice as it is not just used for pensions. What about tax free childcare vouchers, give as you earn and schemes for bikes etc. I don't know how HMRC could distinguish between the different schemes. Personally if they stopped the HRT relief this would encourage more employers to offer salary sacrifice and they'd actually get less NI. Long term less people would pay into their pension and be more reliant on their state pension. A lower LTA and/or annual allowance might not get enough headlines though. 

Presumably it would be quite easy. If they were to pass legislation abolishing pension HRT relief, they add a clause that states salary sacrifice for the purposes of pension payments are no longer permitted. Presumably no employer will intentionally set out to break the law? It would be totally pointless trying to abolish HRT relief on pensions and then leave the door open for salary sacrifice to continue.

[Deleted User]

Re:WFA they could do as they have done with TV licences for the over 75's and limit them to those getting pension credit, an easy way to means test it.
They could also introduce a flat fare of say £1 per journey to all "bus pass" users.

garmeg

NedS said:

Chaarli said:

I am not sure how the government could outlaw salary sacrifice as it is not just used for pensions. What about tax free childcare vouchers, give as you earn and schemes for bikes etc. I don't know how HMRC could distinguish between the different schemes. Personally if they stopped the HRT relief this would encourage more employers to offer salary sacrifice and they'd actually get less NI. Long term less people would pay into their pension and be more reliant on their state pension. A lower LTA and/or annual allowance might not get enough headlines though. 

Presumably it would be quite easy. If they were to pass legislation abolishing pension HRT relief, they add a clause that states salary sacrifice for the purposes of pension payments are no longer permitted. Presumably no employer will intentionally set out to break the law? It would be totally pointless trying to abolish HRT relief on pensions and then leave the door open for salary sacrifice to continue.

Then they would have to do something about employer contributions into public sector DB schemes otherwise the unfair treatment of DC pensions (LTA) compared to public sector DB pensions would be even higher. The Unions would love that.

I dont envy Richi Sunak here.

How about a massive import tariff on all the wasteful Chinese tat that is imported into this country?

NedS

Most remaining DB schemes also have employee contributions and these contributions (together with any additionally purchased DB pension) would presumably be subject to the same tax relief rules as those making contributions to DC schemes.

The discussion here is not about the inequality of DB vs DC schemes, but rather what changes the Chancellor may make to pension tax relief and how it may be implemented.

garmeg

NedS said:

Most remaining DB schemes also have employee contributions and these contributions (together with any additionally purchased DB pension) would presumably be subject to the same tax relief rules as those making contributions to DC schemes.

The discussion here is not about the inequality of DB vs DC schemes, but rather what changes the Chancellor may make to pension tax relief and how it may be implemented.

But we shouldnt accept any unfairness being exacerbated by treating DC contributions differently to DB contributions. The latter may also be distorted by higher contributions to make up any pension deficit. Or for DB do you use notional contributions like you do for the annual allowance test and restrict tax relief / apply NI there?

Yuk. Rather Rishi Sunak than me.

I think Gordon Brown or George Osbourne took a look and thought "Nah!"

cfw1994

Some good discussion on this and the similar thread here.....reminds me that any changes with these things will very likely result in unintended consequences, one way or another!

garmeg

cfw1994 said:

Some good discussion on this and the similar thread here.....reminds me that any changes with these things will very likely result in unintended consequences, one way or another!

They always do, so no reason to think otherwise this time.

zagfles

NedS said:

Most remaining DB schemes also have employee contributions and these contributions (together with any additionally purchased DB pension) would presumably be subject to the same tax relief rules as those making contributions to DC schemes.

The discussion here is not about the inequality of DB vs DC schemes, but rather what changes the Chancellor may make to pension tax relief and how it may be implemented.

You're not getting it. The point is:

1. Employee conts can be treated the same whether DB or DC. HRT relief could be abolished. That's easy. But not the issue.

2. Typical public sector DB pensions also require an employer contribution of typically around 25%. Which is totally free of NI and tax.

3. Typical private sector employer contributions to DC schemes are under 10%.

4. If 2. remains free of NI and tax (ie doesn't become a taxable benefit) then it would be totally unfair not to allow private sector employers and employees to agree to a contract change (ie sal sac) where the employer makes similar level of pension contribution as public sector employer make totally free of NI and tax.

Like I said above it could be limited, it could also be less flexible. But banning it totally would be hugely discriminatory, it would say public sector workers can get employer conts of 25% totally tax free but private sector workers can't.

nigelbb

zagfles said:

NedS said:

Most remaining DB schemes also have employee contributions and these contributions (together with any additionally purchased DB pension) would presumably be subject to the same tax relief rules as those making contributions to DC schemes.

The discussion here is not about the inequality of DB vs DC schemes, but rather what changes the Chancellor may make to pension tax relief and how it may be implemented.

You're not getting it. The point is:

1. Employee conts can be treated the same whether DB or DC. HRT relief could be abolished. That's easy. But not the issue.

2. Typical public sector DB pensions also require an employer contribution of typically around 25%. Which is totally free of NI and tax.

3. Typical private sector employer contributions to DC schemes are under 10%.

4. If 2. remains free of NI and tax (ie doesn't become a taxable benefit) then it would be totally unfair not to allow private sector employers and employees to agree to a contract change (ie sal sac) where the employer makes similar level of pension contribution as public sector employer make totally free of NI and tax.

Like I said above it could be limited, it could also be less flexible. But banning it totally would be hugely discriminatory, it would say public sector workers can get employer conts of 25% totally tax free but private sector workers can't.

Employer pension contributions in public sector DB pensions are theoretical. A DB is effectively deferred salary paid in retirement which will in turn be taxed. 

Albermarle

zagfles said:

NedS said:

Most remaining DB schemes also have employee contributions and these contributions (together with any additionally purchased DB pension) would presumably be subject to the same tax relief rules as those making contributions to DC schemes.

The discussion here is not about the inequality of DB vs DC schemes, but rather what changes the Chancellor may make to pension tax relief and how it may be implemented.

You're not getting it. The point is:

1. Employee conts can be treated the same whether DB or DC. HRT relief could be abolished. That's easy. But not the issue.

2. Typical public sector DB pensions also require an employer contribution of typically around 25%. Which is totally free of NI and tax.

3. Typical private sector employer contributions to DC schemes are under 10%.

4. If 2. remains free of NI and tax (ie doesn't become a taxable benefit) then it would be totally unfair not to allow private sector employers and employees to agree to a contract change (ie sal sac) where the employer makes similar level of pension contribution as public sector employer make totally free of NI and tax.

Like I said above it could be limited, it could also be less flexible. But banning it totally would be hugely discriminatory, it would say public sector workers can get employer conts of 25% totally tax free but private sector workers can't.

It would be unfair but 95% of the population would not understand the details , so the backlash would be limited .