Pensions and paying for Covid

brewerdave

venison said:

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.

WFA is withering away anyway - it was actually reduced in 2010 (?) and hasn't been increased since - I was told years ago that the administrative costs associated with "means testing" would far outweigh its value and that equation must have got more "negative" as time has passed. The problem with aligning with the TV licence model .is that it requires the pensioner to apply for the benefit; can you imagine the headlines if an 85 year old on her own ,stopped getting the WFA and died of hypothermia ?
The people who are most likely to be able to handle an application process, are the least likely to qualify!!
As to bus passes ? Many buses now are travel card/pass only so I've no idea how you would charge a nominal fee.
FWIW, my view is that Rishi Sunak is much more likely to attack tax reliefs than benefits.

zagfles

nigelbb said:

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. 

Err, yes, as are all pensions, DB or DC. The point is NI is not paid on that "deferred salary", plus if higher rate relief were stopped, deferring salary through a generous pension scheme (whether a public sector DB or a sal sac created large DC pot) would effectively give that higher rate relief.

So banning sal sac for people in DC schemes with 8% employer conts while people in DB schemes with 25% employer conts remain would be hugely discriminatory

zagfles

Albermarle said:

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 .

Sadly true. But in practice what could they actually do? How could the govt stop an employer and employee negotiating a contract where instead of getting paid £60k plus £5k employer pension contributions, they agree a £50k salary and £15k employer pension contribution? Other than, as I said above, making pension conts over a certain % of salary a taxable benefit. And if they did that, the % would have to be on a level with the most generous public sector schemes.

kangoora

Surely this 'injustice' on no employer NI conts has been going on forever, even before salary sacrifice became a thing generally used, as long as DC pensions have been in payment. The inequality is still going on for 100's of 1,000's of people across the country even now who aren't in salary sacrifice schemes. The fact that people currently on SS would end up in the same situation as the rest of the non-DB scheme PAYE employees doesn't negate the fact they are currently themselves enjoying a tax avoidance benefit that a large number of employees don't have access to anyway. There's already a 3 tier taxation system, DB schemes, SS schemes and everyone else on PAYE not in either of the previous 2 systems. To my mind they should make everyone currently on PAYE paid via SS or remove SS entirely as an option and at the same time look into the whole DB system - but good luck with that with the unions

You could easily argue that anyone on a SS scheme is hugely discriminatory against any other PAYE employee who doesn't have access to an SS sceme

I'm no great supporter of governmental DB schemes (even though I have 1 small one myself due) as I think this whole argument of 'lower pay for a better pension' is specious for the (very) large parts of the UK apart from London, Home Counties and the South-east. Where I live LG, NHS, Police, Teaching etc wages are pretty good compared to wages in the local economy. I'm also fairly sure that applies to pretty much most of the country excepting the areas mentioned previously, apart from possibly pockets around major regional cities.

NedS

zagfles said:

nigelbb said:

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. 

Err, yes, as are all pensions, DB or DC. The point is NI is not paid on that "deferred salary", plus if higher rate relief were stopped, deferring salary through a generous pension scheme (whether a public sector DB or a sal sac created large DC pot) would effectively give that higher rate relief.

So banning sal sac for people in DC schemes with 8% employer conts while people in DB schemes with 25% employer conts remain would be hugely discriminatory

So where , exactly, is the 27% of my salary that my employer 'pays' each month? This is not like a private sector final salary pension that has a pot of money invested to meet future liabilities. Like nigelbb said, it's simply a deferment, a promise.

ZeroSum

NedS said:

zagfles said:

nigelbb said:

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. 

Err, yes, as are all pensions, DB or DC. The point is NI is not paid on that "deferred salary", plus if higher rate relief were stopped, deferring salary through a generous pension scheme (whether a public sector DB or a sal sac created large DC pot) would effectively give that higher rate relief.

So banning sal sac for people in DC schemes with 8% employer conts while people in DB schemes with 25% employer conts remain would be hugely discriminatory

So where , exactly, is the 27% of my salary that my employer 'pays' each month? This is not like a private sector final salary pension that has a pot of money invested to meet future liabilities. Like nigelbb said, it's simply a deferment, a promise.

If its local government, there is an actual fund. The rest, its just one government department paying money to another. 

zagfles

NedS said:

zagfles said:

nigelbb said:

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. 

Err, yes, as are all pensions, DB or DC. The point is NI is not paid on that "deferred salary", plus if higher rate relief were stopped, deferring salary through a generous pension scheme (whether a public sector DB or a sal sac created large DC pot) would effectively give that higher rate relief.

So banning sal sac for people in DC schemes with 8% employer conts while people in DB schemes with 25% employer conts remain would be hugely discriminatory

So where , exactly, is the 27% of my salary that my employer 'pays' each month? This is not like a private sector final salary pension that has a pot of money invested to meet future liabilities. Like nigelbb said, it's simply a deferment, a promise.

All DB schemes, funded or not, are a "promise". That promise can be valued at the time it's made, ie during accrual of the pension benefits. As already happens for annual allowance purposes. 

Alternatively - just have actual deferred salary and pay NI on it when taking it, would that be preferable 

p00hsticks

venison said:

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.

There is an already an effectively  mean tested benefit in place that is intended to help pay for winter fuel.

A Cold Weather payment of £25 a week is automatically paid to anyone on qualifying means tested benefits ( Pension Credit, Universal Credit, income based JSA or ESA) for any week in November-March when the average temperature in the locality is below freezing for seven days in a row.

https://www.gov.uk/cold-weather-payment

So if savings need to be made but the poorest still protected, then rather than means testing the WFA it would arguably make more sense to reduce/remove the WFA and increase the existing Cold Weather payments.

nigelbb

zagfles said:

NedS said:

zagfles said:

nigelbb said:

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. 

Err, yes, as are all pensions, DB or DC. The point is NI is not paid on that "deferred salary", plus if higher rate relief were stopped, deferring salary through a generous pension scheme (whether a public sector DB or a sal sac created large DC pot) would effectively give that higher rate relief.

So banning sal sac for people in DC schemes with 8% employer conts while people in DB schemes with 25% employer conts remain would be hugely discriminatory

So where , exactly, is the 27% of my salary that my employer 'pays' each month? This is not like a private sector final salary pension that has a pot of money invested to meet future liabilities. Like nigelbb said, it's simply a deferment, a promise.

All DB schemes, funded or not, are a "promise". That promise can be valued at the time it's made, ie during accrual of the pension benefits. As already happens for annual allowance purposes. 

Alternatively - just have actual deferred salary and pay NI on it when taking it, would that be preferable 

No problem as we pensioners don't pay NI on our salary anyway which is a nice bonus for those of us who are still in work.

Anonymous101

How long do you think it would take to sort out removing the Higher Rate Tax Relief?
 As others have said it would also mean a likely end to Salary Sacrifice schemes. The administrative cost taking up alternative schemes doesn't appear insignificant to me so presumably when it is announced there would have to be a year or two's notice for new systems to be put in place.

Purely a selfish question. I take full advantage of the tax relief through Sal Sac and would want to continue to make use of the benefit for another 3 or 4 years if possible.