Pension tax raid being touted again

zagfles

Daniel54 said:

It seems sensible to me that legislation should consider "wriggle room" should the NIF be in substantial surplus  as per the GAD and  funds might be better directed to the NHS.

Imagine if company pension funds allowed "wriggle room" or for contributions to be "diverted" to other things nothing to do with paying out contributory benefits...

Daniel54

zagfles said:

Daniel54 said:

It seems sensible to me that legislation should consider "wriggle room" should the NIF be in substantial surplus  as per the GAD and  funds might be better directed to the NHS.

Imagine if company pension funds allowed "wriggle room" or for contributions to be "diverted" to other things nothing to do with paying out contributory benefits...

Having read your valuable and informed  contributions to this website  trust you are aware that that the state pension is a benefit within the welfare state and bears no relation to occupational pensions.Nor is it benefit where contributions made or credited bear any direct relation to what has been paid in and benefits are paid out.




T

zagfles

Daniel54 said:

zagfles said:

Daniel54 said:

It seems sensible to me that legislation should consider "wriggle room" should the NIF be in substantial surplus  as per the GAD and  funds might be better directed to the NHS.

Imagine if company pension funds allowed "wriggle room" or for contributions to be "diverted" to other things nothing to do with paying out contributory benefits...

Having read your valuable and informed  contributions to this website  trust you are aware that that the state pension is a benefit within the welfare state and bears no relation to occupational pensions.Nor is it benefit where contributions made or credited bear any direct relation to what has been paid in and benefits are paid out.

Which is exactly the point I and others were trying to make. NI is more like a tax than a contribution to an insurance/pension fund.

nigelbb

zagfles said:

nigelbb said:

jimi_man said:

nigelbb said:

Mickey666 said:

zagfles said:

Mickey666 said:

How about removing the cap on NI contributions?  When most other taxes seem to be progressive,  I’ve never quite understood why the NIC rate REDUCES for higher earners?  

Because the annualised threshold co-incides with higher rate tax, so combined with income tax it is generally progressive, from 32% to 42%. But there are some anomilies to do with income tax being assessed over the year and NI over the pay period...

It’s really just paying politics isn’t it?  There’s no real justification for not combining income tax and NI into a single income tax, but governments like to have a complicated tax system because it gives them something to fiddle around with come budget time.

National Insurance isn’t just another income tax though as it is that very rare example of an hypothecated tax (the TV licence fee is the only other one I can think of). NI contributions are paid into the NI fund which is used for paying pensions & a few other work related benefits line JSA). 

And the NHS. 

Only a small proportion of NHS funding comes from NI contributions. In 2019 it was about £25 billion. After the NHS allocation was paid over by HMRC the receipts from NI contributions were almost £109 billion in 2019 with over £100 billion paid out in pensions & other benefits. Total NHS funding in 2019 was around £125 billion with the missing £100 billion funded out of general taxation. Fully funding the NHS from NI would require contributions to be more than doubled.

Here is the annual report of the National Insurance Fund https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/839411/Great_Britain_National_Insurance_Fund_Account_-_2018_to_2019.pdf

So it's not "hypothecated" then. Some of it is nicked to supplement general taxation (ie help fund the NHS which is mainly paid for from general taxation).

The revenue from a hypothecated tax is dedicated for a particular expenditure purpose. National Insurance is a perfect example of a hypothecated tax bout 20% dedicated to the NHS & the remainder to pensions & other contributory benefits.

zagfles

nigelbb said:

zagfles said:

nigelbb said:

jimi_man said:

nigelbb said:

Mickey666 said:

zagfles said:

Mickey666 said:

How about removing the cap on NI contributions?  When most other taxes seem to be progressive,  I’ve never quite understood why the NIC rate REDUCES for higher earners?  

Because the annualised threshold co-incides with higher rate tax, so combined with income tax it is generally progressive, from 32% to 42%. But there are some anomilies to do with income tax being assessed over the year and NI over the pay period...

It’s really just paying politics isn’t it?  There’s no real justification for not combining income tax and NI into a single income tax, but governments like to have a complicated tax system because it gives them something to fiddle around with come budget time.

National Insurance isn’t just another income tax though as it is that very rare example of an hypothecated tax (the TV licence fee is the only other one I can think of). NI contributions are paid into the NI fund which is used for paying pensions & a few other work related benefits line JSA). 

And the NHS. 

Only a small proportion of NHS funding comes from NI contributions. In 2019 it was about £25 billion. After the NHS allocation was paid over by HMRC the receipts from NI contributions were almost £109 billion in 2019 with over £100 billion paid out in pensions & other benefits. Total NHS funding in 2019 was around £125 billion with the missing £100 billion funded out of general taxation. Fully funding the NHS from NI would require contributions to be more than doubled.

Here is the annual report of the National Insurance Fund https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/839411/Great_Britain_National_Insurance_Fund_Account_-_2018_to_2019.pdf

So it's not "hypothecated" then. Some of it is nicked to supplement general taxation (ie help fund the NHS which is mainly paid for from general taxation).

The revenue from a hypothecated tax is dedicated for a particular expenditure purpose. National Insurance is a perfect example of a hypothecated tax bout 20% dedicated to the NHS & the remainder to pensions & other contributory benefits.

Are we going round in circles? See above.

bigadaj

nigelbb said:

zagfles said:

nigelbb said:

jimi_man said:

nigelbb said:

Mickey666 said:

zagfles said:

Mickey666 said:

How about removing the cap on NI contributions?  When most other taxes seem to be progressive,  I’ve never quite understood why the NIC rate REDUCES for higher earners?  

Because the annualised threshold co-incides with higher rate tax, so combined with income tax it is generally progressive, from 32% to 42%. But there are some anomilies to do with income tax being assessed over the year and NI over the pay period...

It’s really just paying politics isn’t it?  There’s no real justification for not combining income tax and NI into a single income tax, but governments like to have a complicated tax system because it gives them something to fiddle around with come budget time.

National Insurance isn’t just another income tax though as it is that very rare example of an hypothecated tax (the TV licence fee is the only other one I can think of). NI contributions are paid into the NI fund which is used for paying pensions & a few other work related benefits line JSA). 

And the NHS. 

Only a small proportion of NHS funding comes from NI contributions. In 2019 it was about £25 billion. After the NHS allocation was paid over by HMRC the receipts from NI contributions were almost £109 billion in 2019 with over £100 billion paid out in pensions & other benefits. Total NHS funding in 2019 was around £125 billion with the missing £100 billion funded out of general taxation. Fully funding the NHS from NI would require contributions to be more than doubled.

Here is the annual report of the National Insurance Fund https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/839411/Great_Britain_National_Insurance_Fund_Account_-_2018_to_2019.pdf

So it's not "hypothecated" then. Some of it is nicked to supplement general taxation (ie help fund the NHS which is mainly paid for from general taxation).

The revenue from a hypothecated tax is dedicated for a particular expenditure purpose. National Insurance is a perfect example of a hypothecated tax bout 20% dedicated to the NHS & the remainder to pensions & other contributory benefits.

It's a perfect example of a politically hypothecated tax. If it were a truly hypothecated tax it would be stricly ring fenced and the only option would be to increase or decrease the tax, or similarly vary the benefits. Governments treat it like a piggy bank and dip in and top up as they feel necessary,

Daniel54

zagfles said:

Which is exactly the point I and others were trying to make. NI is more like a tax than a contribution to an insurance/pension fund.

No argument there .NI is tax and as such confers no contractual property rights, unlike an occupational  pension,

Daniel54

bigadaj said:

It's a perfect example of a politically hypothecated tax. If it were a truly hypothecated tax it would be stricly ring fenced and the only option would be to increase or decrease the tax, or similarly vary the benefits. Governments treat it like a piggy bank and dip in and top up as they feel necessary,

The liquidity of the NIF is guaranteed by HMG ,so ultimately by tax receipts of whatever nature.
Faced with a lack of future liquidity ,successive governments have chosen to vary the benefit by increasing state pension age,rather than increasing the rates of national insurance.Just as you say.
I have pointed you towards the legal structure surrounding the payment and disbursement of NICs.These do not allow any Government to treat the NIF as a piggy bank to spend as they choose .Equally,if the NIF falls below mandated levels,Government is obligated to top up the fund from general taxation. 

michaels

Daniel54 said:

bigadaj said:

It's a perfect example of a politically hypothecated tax. If it were a truly hypothecated tax it would be stricly ring fenced and the only option would be to increase or decrease the tax, or similarly vary the benefits. Governments treat it like a piggy bank and dip in and top up as they feel necessary,

The liquidity of the NIF is guaranteed by HMG ,so ultimately by tax receipts of whatever nature.
Faced with a lack of future liquidity ,successive governments have chosen to vary the benefit by increasing state pension age,rather than increasing the rates of national insurance.Just as you say.
I have pointed you towards the legal structure surrounding the payment and disbursement of NICs.These do not allow any Government to treat the NIF as a piggy bank to spend as they choose .Equally,if the NIF falls below mandated levels,Government is obligated to top up the fund from general taxation. 

So you are agreeing, the govt raises taxes or borrows to fund its spending commitments whatever name it happens to give to particular bits of tax or particular spending commitments.

Daniel54

michaels said:

Daniel54 said:

bigadaj said:

It's a perfect example of a politically hypothecated tax. If it were a truly hypothecated tax it would be stricly ring fenced and the only option would be to increase or decrease the tax, or similarly vary the benefits. Governments treat it like a piggy bank and dip in and top up as they feel necessary,

The liquidity of the NIF is guaranteed by HMG ,so ultimately by tax receipts of whatever nature.
Faced with a lack of future liquidity ,successive governments have chosen to vary the benefit by increasing state pension age,rather than increasing the rates of national insurance.Just as you say.
I have pointed you towards the legal structure surrounding the payment and disbursement of NICs.These do not allow any Government to treat the NIF as a piggy bank to spend as they choose .Equally,if the NIF falls below mandated levels,Government is obligated to top up the fund from general taxation. 

So you are agreeing, the govt raises taxes or borrows to fund its spending commitments whatever name it happens to give to particular bits of tax or particular spending commitments.

Absolutely.Tax is tax

But my point is that  NICs,in their payment and disbursement  sit in a different legal environment to that of general taxation such as income tax, for example.

To take but one difference, NICs are payable weekly whereas income tax is payable annually.

There are understandable reasons why over the decades Chancellors have shied away from integrating these two different taxes.