Rishi after Pensions Tax Relief

jimi_man

chucknorris said:

michaels said:

CSL0183 said:

michaels said:

CSL0183 said:

michaels said:

CSL0183 said:

Employee gets paid £60k pa and has a 10% matched contribution with the employer known as Salary Sacrifice. Effectively the employee is agreeing to take a pay cut to £54k and the employer contributes the £12k into the fund. That’s the way the current SS scheme works. 

If the government tried to close it down and make it “Illegal” then what’s to stop the employer to say this position is now £54k and your pension is now entirely non contributory. £12k still goes into your fund free of any employers taxation and that way your pension is now non contributory. 

If they then try to close this loophole and make employers contributions a benefit in kind then my previously raised points crop up. The same would then need to be applied to the public sector and there would be huge fallout. 

This is far from easy. 

We all know that they will claim to have raised the tax relief form 20% to 25% on pension contributions but that this will include all contributions whether they are employer or employee and regardless of the tax band of the employee.  The only pensions not impacted will be defined benefit 'to encourage this form of provision'

Agreed, I can see the Government propaganda machine in overdrive trying to convince everyone that 20-25% is a good thing. However, suspect the media will pick up on the fact that their take home pays will Infact drop as a result if they had previously been getting 32% relief. That along with the fallout from the higher rate taxpayers. 

It could stifle the economy to be fair. People could continue with their normal contributions and take the hit in take home pay or they can reduce their pension contribution so that they are no worse off take home pay wise. Either way, spending power is reduced now or in the future. 

So the govt gets more revenue now (to spend on election bribes) at the expense of less in the future when whichever party is in charge it won't be the same politicians...now tell what the downside is for the current gov?

They won’t make another term, they will lose their core middle class vote due to the double taxation if HRT relief is cut and if they go after the public sector schemes, they would lose a lot of votes there too. In addition, if they are making millions of basic rate taxpayers worse off by scrapping SS, there’s votes to be lost there too. 

So yeah, losing millions of votes would be the downside about a pensions tax raid. 

I am yet to meet a public sector worker who has a clue just how much their DB pension is worth and similarly if private sector workers see the same deductions each month so take home pay doesn't change but 20% less is going into their pension the majority will not have a clue.

In reality the unions would kick off if DB pensions were hit so no doubt an exception will be made for these.  they are already grossly unfair so making them even more unfair will not really be noticed by the majority.

Although I know exactly the benefit of my TPS (Teachers Pension Scheme) pension, you are right that many do not realise the value of them, I can think only of one of my fellow lecturers that knows the value of it (excluding the ones that I have explained it too). This is a conversion that I had with one of my colleagues, when I said "congratulations on your promotion to principal lecturer, as well as a salary increase of course your accrued pension will increase too". He actually said, "my pension isn't worth much, it is only about £1,000 a year". He was actually valuing it at only £1,000  per annum of salary, instead of realising that it is an extra £1,000 pension paid on retirement annually for every year until death (the possibly some to his spouse) that he works. I still don't think he fully understood, when I explained that if he wanted to buy an annuity that paid £1,000 per annum (index linked, with spouse benefits) that it would cos about £37k (depending on the provider).
Personally I do not particularly like annuities though, mainly because when I retire I will have just under £30k of index linked pension and much more income from elsewhere (and my wife's income is significant too). So an annuity just isn't as valuable to me as other alternative investments, as it could be to others on a lower pension income. So, I only use a multiplier of 28.5 (not 37) on my spreadsheet, but the value is very subjective, for someone with lower retirement income, the multiplier would be higher than 28.5. The 37 is a rough figure, I did not do a search of the actual costs of annuities. The only other person who I have discussed pension with (in person, not on a forum) that seems to fully understand the value is my wife, but she is a retired actuary (so obviously she would know the value).

One of my problems (if you can call it that) is that the percentage of DB income is probably too high in my (our) retirement plans. My public sector pension in payment now (police) is just under £31k.  For the rest, my wife has a further £10k in public sector pensions, and I am accruing Civil Service pension with another (£3k roughly) to come - all at 65. We'll have full state pensions adding another £9k each. Where we are short is in DC style pensions, and cash funds to supplement the police pension from when we finish (say 58) until 65. I did consider opting for the Civil Service partnership pension but the Alpha seemed so attractive at my age (54 at the time) so I went for it. We've been piling into our SIPPs to try and bulk them out in order to use that and I'm considering taking the other pensions earlier to smooth out the income a bit.

Like you though, I am aware of the cost of providing such a pension, though it's difficult to assess exact value  - I know it's expensive! Comparing with Annuities is tricky since you can't get one at 51 which is when the pension started. 

chucknorris

jimi_man said:

chucknorris said:

michaels said:

CSL0183 said:

michaels said:

CSL0183 said:

michaels said:

CSL0183 said:

Employee gets paid £60k pa and has a 10% matched contribution with the employer known as Salary Sacrifice. Effectively the employee is agreeing to take a pay cut to £54k and the employer contributes the £12k into the fund. That’s the way the current SS scheme works. 

If the government tried to close it down and make it “Illegal” then what’s to stop the employer to say this position is now £54k and your pension is now entirely non contributory. £12k still goes into your fund free of any employers taxation and that way your pension is now non contributory. 

If they then try to close this loophole and make employers contributions a benefit in kind then my previously raised points crop up. The same would then need to be applied to the public sector and there would be huge fallout. 

This is far from easy. 

We all know that they will claim to have raised the tax relief form 20% to 25% on pension contributions but that this will include all contributions whether they are employer or employee and regardless of the tax band of the employee.  The only pensions not impacted will be defined benefit 'to encourage this form of provision'

Agreed, I can see the Government propaganda machine in overdrive trying to convince everyone that 20-25% is a good thing. However, suspect the media will pick up on the fact that their take home pays will Infact drop as a result if they had previously been getting 32% relief. That along with the fallout from the higher rate taxpayers. 

It could stifle the economy to be fair. People could continue with their normal contributions and take the hit in take home pay or they can reduce their pension contribution so that they are no worse off take home pay wise. Either way, spending power is reduced now or in the future. 

So the govt gets more revenue now (to spend on election bribes) at the expense of less in the future when whichever party is in charge it won't be the same politicians...now tell what the downside is for the current gov?

They won’t make another term, they will lose their core middle class vote due to the double taxation if HRT relief is cut and if they go after the public sector schemes, they would lose a lot of votes there too. In addition, if they are making millions of basic rate taxpayers worse off by scrapping SS, there’s votes to be lost there too. 

So yeah, losing millions of votes would be the downside about a pensions tax raid. 

I am yet to meet a public sector worker who has a clue just how much their DB pension is worth and similarly if private sector workers see the same deductions each month so take home pay doesn't change but 20% less is going into their pension the majority will not have a clue.

In reality the unions would kick off if DB pensions were hit so no doubt an exception will be made for these.  they are already grossly unfair so making them even more unfair will not really be noticed by the majority.

Although I know exactly the benefit of my TPS (Teachers Pension Scheme) pension, you are right that many do not realise the value of them, I can think only of one of my fellow lecturers that knows the value of it (excluding the ones that I have explained it too). This is a conversion that I had with one of my colleagues, when I said "congratulations on your promotion to principal lecturer, as well as a salary increase of course your accrued pension will increase too". He actually said, "my pension isn't worth much, it is only about £1,000 a year". He was actually valuing it at only £1,000  per annum of salary, instead of realising that it is an extra £1,000 pension paid on retirement annually for every year until death (the possibly some to his spouse) that he works. I still don't think he fully understood, when I explained that if he wanted to buy an annuity that paid £1,000 per annum (index linked, with spouse benefits) that it would cos about £37k (depending on the provider).
Personally I do not particularly like annuities though, mainly because when I retire I will have just under £30k of index linked pension and much more income from elsewhere (and my wife's income is significant too). So an annuity just isn't as valuable to me as other alternative investments, as it could be to others on a lower pension income. So, I only use a multiplier of 28.5 (not 37) on my spreadsheet, but the value is very subjective, for someone with lower retirement income, the multiplier would be higher than 28.5. The 37 is a rough figure, I did not do a search of the actual costs of annuities. The only other person who I have discussed pension with (in person, not on a forum) that seems to fully understand the value is my wife, but she is a retired actuary (so obviously she would know the value).

One of my problems (if you can call it that) is that the percentage of DB income is probably too high in my (our) retirement plans. My public sector pension in payment now (police) is just under £31k.  For the rest, my wife has a further £10k in public sector pensions, and I am accruing Civil Service pension with another (£3k roughly) to come - all at 65. We'll have full state pensions adding another £9k each. Where we are short is in DC style pensions, and cash funds to supplement the police pension from when we finish (say 58) until 65. I did consider opting for the Civil Service partnership pension but the Alpha seemed so attractive at my age (54 at the time) so I went for it. We've been piling into our SIPPs to try and bulk them out in order to use that and I'm considering taking the other pensions earlier to smooth out the income a bit.

Like you though, I am aware of the cost of providing such a pension, though it's difficult to assess exact value  - I know it's expensive! Comparing with Annuities is tricky since you can't get one at 51 which is when the pension started. 

Yes as you imply, it is a good 'problem' to have. I'm lucky that I like my job so I don't want to retire early or probably even at state pension age. But I do only currently work on a 0.4  fractional contract, although I am currently discussing moving up to 0.5. Would working on a fractional appointment instead of retiring work for you? The only disadvantage for me (us) is that it limits holidays abroad (off season here, but warm abroad), but because our dog always go were we go, and we are fed up with the long drive from Northern to Southern Spain, that is no longer a concern for us.

jimi_man

chucknorris said:

jimi_man said:

chucknorris said:

michaels said:

CSL0183 said:

michaels said:

CSL0183 said:

michaels said:

CSL0183 said:

Employee gets paid £60k pa and has a 10% matched contribution with the employer known as Salary Sacrifice. Effectively the employee is agreeing to take a pay cut to £54k and the employer contributes the £12k into the fund. That’s the way the current SS scheme works. 

If the government tried to close it down and make it “Illegal” then what’s to stop the employer to say this position is now £54k and your pension is now entirely non contributory. £12k still goes into your fund free of any employers taxation and that way your pension is now non contributory. 

If they then try to close this loophole and make employers contributions a benefit in kind then my previously raised points crop up. The same would then need to be applied to the public sector and there would be huge fallout. 

This is far from easy. 

We all know that they will claim to have raised the tax relief form 20% to 25% on pension contributions but that this will include all contributions whether they are employer or employee and regardless of the tax band of the employee.  The only pensions not impacted will be defined benefit 'to encourage this form of provision'

Agreed, I can see the Government propaganda machine in overdrive trying to convince everyone that 20-25% is a good thing. However, suspect the media will pick up on the fact that their take home pays will Infact drop as a result if they had previously been getting 32% relief. That along with the fallout from the higher rate taxpayers. 

It could stifle the economy to be fair. People could continue with their normal contributions and take the hit in take home pay or they can reduce their pension contribution so that they are no worse off take home pay wise. Either way, spending power is reduced now or in the future. 

So the govt gets more revenue now (to spend on election bribes) at the expense of less in the future when whichever party is in charge it won't be the same politicians...now tell what the downside is for the current gov?

They won’t make another term, they will lose their core middle class vote due to the double taxation if HRT relief is cut and if they go after the public sector schemes, they would lose a lot of votes there too. In addition, if they are making millions of basic rate taxpayers worse off by scrapping SS, there’s votes to be lost there too. 

So yeah, losing millions of votes would be the downside about a pensions tax raid. 

I am yet to meet a public sector worker who has a clue just how much their DB pension is worth and similarly if private sector workers see the same deductions each month so take home pay doesn't change but 20% less is going into their pension the majority will not have a clue.

In reality the unions would kick off if DB pensions were hit so no doubt an exception will be made for these.  they are already grossly unfair so making them even more unfair will not really be noticed by the majority.

Although I know exactly the benefit of my TPS (Teachers Pension Scheme) pension, you are right that many do not realise the value of them, I can think only of one of my fellow lecturers that knows the value of it (excluding the ones that I have explained it too). This is a conversion that I had with one of my colleagues, when I said "congratulations on your promotion to principal lecturer, as well as a salary increase of course your accrued pension will increase too". He actually said, "my pension isn't worth much, it is only about £1,000 a year". He was actually valuing it at only £1,000  per annum of salary, instead of realising that it is an extra £1,000 pension paid on retirement annually for every year until death (the possibly some to his spouse) that he works. I still don't think he fully understood, when I explained that if he wanted to buy an annuity that paid £1,000 per annum (index linked, with spouse benefits) that it would cos about £37k (depending on the provider).
Personally I do not particularly like annuities though, mainly because when I retire I will have just under £30k of index linked pension and much more income from elsewhere (and my wife's income is significant too). So an annuity just isn't as valuable to me as other alternative investments, as it could be to others on a lower pension income. So, I only use a multiplier of 28.5 (not 37) on my spreadsheet, but the value is very subjective, for someone with lower retirement income, the multiplier would be higher than 28.5. The 37 is a rough figure, I did not do a search of the actual costs of annuities. The only other person who I have discussed pension with (in person, not on a forum) that seems to fully understand the value is my wife, but she is a retired actuary (so obviously she would know the value).

One of my problems (if you can call it that) is that the percentage of DB income is probably too high in my (our) retirement plans. My public sector pension in payment now (police) is just under £31k.  For the rest, my wife has a further £10k in public sector pensions, and I am accruing Civil Service pension with another (£3k roughly) to come - all at 65. We'll have full state pensions adding another £9k each. Where we are short is in DC style pensions, and cash funds to supplement the police pension from when we finish (say 58) until 65. I did consider opting for the Civil Service partnership pension but the Alpha seemed so attractive at my age (54 at the time) so I went for it. We've been piling into our SIPPs to try and bulk them out in order to use that and I'm considering taking the other pensions earlier to smooth out the income a bit.

Like you though, I am aware of the cost of providing such a pension, though it's difficult to assess exact value  - I know it's expensive! Comparing with Annuities is tricky since you can't get one at 51 which is when the pension started. 

Yes as you imply, it is a good 'problem' to have. I'm lucky that I like my job so I don't want to retire early or probably even at state pension age. But I do only currently work on a 0.4  fractional contract, although I am currently discussing moving up to 0.5. Would working on a fractional appointment instead of retiring work for you? The only disadvantage for me (us) is that it limits holidays abroad (off season here, but warm abroad), but because our dog always go were we go, and we are fed up with the long drive from Northern to Southern Spain, that is no longer a concern for us.

Well I am contemplating going part time next year anyway to try it. HRT and 12% NI means I lose 52% of everything above £50k hence why I'm putting a reasonable amount into my SIPP. So part time wouldn't make such a huge difference - other than not putting as much into my SIPP.

garmeg

jimi_man said:

chucknorris said:

jimi_man said:

chucknorris said:

michaels said:

CSL0183 said:

michaels said:

CSL0183 said:

michaels said:

CSL0183 said:

Employee gets paid £60k pa and has a 10% matched contribution with the employer known as Salary Sacrifice. Effectively the employee is agreeing to take a pay cut to £54k and the employer contributes the £12k into the fund. That’s the way the current SS scheme works. 

If the government tried to close it down and make it “Illegal” then what’s to stop the employer to say this position is now £54k and your pension is now entirely non contributory. £12k still goes into your fund free of any employers taxation and that way your pension is now non contributory. 

If they then try to close this loophole and make employers contributions a benefit in kind then my previously raised points crop up. The same would then need to be applied to the public sector and there would be huge fallout. 

This is far from easy. 

We all know that they will claim to have raised the tax relief form 20% to 25% on pension contributions but that this will include all contributions whether they are employer or employee and regardless of the tax band of the employee.  The only pensions not impacted will be defined benefit 'to encourage this form of provision'

Agreed, I can see the Government propaganda machine in overdrive trying to convince everyone that 20-25% is a good thing. However, suspect the media will pick up on the fact that their take home pays will Infact drop as a result if they had previously been getting 32% relief. That along with the fallout from the higher rate taxpayers. 

It could stifle the economy to be fair. People could continue with their normal contributions and take the hit in take home pay or they can reduce their pension contribution so that they are no worse off take home pay wise. Either way, spending power is reduced now or in the future. 

So the govt gets more revenue now (to spend on election bribes) at the expense of less in the future when whichever party is in charge it won't be the same politicians...now tell what the downside is for the current gov?

They won’t make another term, they will lose their core middle class vote due to the double taxation if HRT relief is cut and if they go after the public sector schemes, they would lose a lot of votes there too. In addition, if they are making millions of basic rate taxpayers worse off by scrapping SS, there’s votes to be lost there too. 

So yeah, losing millions of votes would be the downside about a pensions tax raid. 

I am yet to meet a public sector worker who has a clue just how much their DB pension is worth and similarly if private sector workers see the same deductions each month so take home pay doesn't change but 20% less is going into their pension the majority will not have a clue.

In reality the unions would kick off if DB pensions were hit so no doubt an exception will be made for these.  they are already grossly unfair so making them even more unfair will not really be noticed by the majority.

Although I know exactly the benefit of my TPS (Teachers Pension Scheme) pension, you are right that many do not realise the value of them, I can think only of one of my fellow lecturers that knows the value of it (excluding the ones that I have explained it too). This is a conversion that I had with one of my colleagues, when I said "congratulations on your promotion to principal lecturer, as well as a salary increase of course your accrued pension will increase too". He actually said, "my pension isn't worth much, it is only about £1,000 a year". He was actually valuing it at only £1,000  per annum of salary, instead of realising that it is an extra £1,000 pension paid on retirement annually for every year until death (the possibly some to his spouse) that he works. I still don't think he fully understood, when I explained that if he wanted to buy an annuity that paid £1,000 per annum (index linked, with spouse benefits) that it would cos about £37k (depending on the provider).
Personally I do not particularly like annuities though, mainly because when I retire I will have just under £30k of index linked pension and much more income from elsewhere (and my wife's income is significant too). So an annuity just isn't as valuable to me as other alternative investments, as it could be to others on a lower pension income. So, I only use a multiplier of 28.5 (not 37) on my spreadsheet, but the value is very subjective, for someone with lower retirement income, the multiplier would be higher than 28.5. The 37 is a rough figure, I did not do a search of the actual costs of annuities. The only other person who I have discussed pension with (in person, not on a forum) that seems to fully understand the value is my wife, but she is a retired actuary (so obviously she would know the value).

One of my problems (if you can call it that) is that the percentage of DB income is probably too high in my (our) retirement plans. My public sector pension in payment now (police) is just under £31k.  For the rest, my wife has a further £10k in public sector pensions, and I am accruing Civil Service pension with another (£3k roughly) to come - all at 65. We'll have full state pensions adding another £9k each. Where we are short is in DC style pensions, and cash funds to supplement the police pension from when we finish (say 58) until 65. I did consider opting for the Civil Service partnership pension but the Alpha seemed so attractive at my age (54 at the time) so I went for it. We've been piling into our SIPPs to try and bulk them out in order to use that and I'm considering taking the other pensions earlier to smooth out the income a bit.

Like you though, I am aware of the cost of providing such a pension, though it's difficult to assess exact value  - I know it's expensive! Comparing with Annuities is tricky since you can't get one at 51 which is when the pension started. 

Yes as you imply, it is a good 'problem' to have. I'm lucky that I like my job so I don't want to retire early or probably even at state pension age. But I do only currently work on a 0.4  fractional contract, although I am currently discussing moving up to 0.5. Would working on a fractional appointment instead of retiring work for you? The only disadvantage for me (us) is that it limits holidays abroad (off season here, but warm abroad), but because our dog always go were we go, and we are fed up with the long drive from Northern to Southern Spain, that is no longer a concern for us.

Well I am contemplating going part time next year anyway to try it. HRT and 12% NI means I lose 52% of everything above £50k hence why I'm putting a reasonable amount into my SIPP. So part time wouldn't make such a huge difference - other than not putting as much into my SIPP.

NI is 2% over £50k so you lose 42% not 52% over that point.

CSL0183

garmeg said:

jimi_man said:

chucknorris said:

jimi_man said:

chucknorris said:

michaels said:

CSL0183 said:

michaels said:

CSL0183 said:

michaels said:

CSL0183 said:

Employee gets paid £60k pa and has a 10% matched contribution with the employer known as Salary Sacrifice. Effectively the employee is agreeing to take a pay cut to £54k and the employer contributes the £12k into the fund. That’s the way the current SS scheme works. 

If the government tried to close it down and make it “Illegal” then what’s to stop the employer to say this position is now £54k and your pension is now entirely non contributory. £12k still goes into your fund free of any employers taxation and that way your pension is now non contributory. 

If they then try to close this loophole and make employers contributions a benefit in kind then my previously raised points crop up. The same would then need to be applied to the public sector and there would be huge fallout. 

This is far from easy. 

We all know that they will claim to have raised the tax relief form 20% to 25% on pension contributions but that this will include all contributions whether they are employer or employee and regardless of the tax band of the employee.  The only pensions not impacted will be defined benefit 'to encourage this form of provision'

Agreed, I can see the Government propaganda machine in overdrive trying to convince everyone that 20-25% is a good thing. However, suspect the media will pick up on the fact that their take home pays will Infact drop as a result if they had previously been getting 32% relief. That along with the fallout from the higher rate taxpayers. 

It could stifle the economy to be fair. People could continue with their normal contributions and take the hit in take home pay or they can reduce their pension contribution so that they are no worse off take home pay wise. Either way, spending power is reduced now or in the future. 

So the govt gets more revenue now (to spend on election bribes) at the expense of less in the future when whichever party is in charge it won't be the same politicians...now tell what the downside is for the current gov?

They won’t make another term, they will lose their core middle class vote due to the double taxation if HRT relief is cut and if they go after the public sector schemes, they would lose a lot of votes there too. In addition, if they are making millions of basic rate taxpayers worse off by scrapping SS, there’s votes to be lost there too. 

So yeah, losing millions of votes would be the downside about a pensions tax raid. 

I am yet to meet a public sector worker who has a clue just how much their DB pension is worth and similarly if private sector workers see the same deductions each month so take home pay doesn't change but 20% less is going into their pension the majority will not have a clue.

In reality the unions would kick off if DB pensions were hit so no doubt an exception will be made for these.  they are already grossly unfair so making them even more unfair will not really be noticed by the majority.

Although I know exactly the benefit of my TPS (Teachers Pension Scheme) pension, you are right that many do not realise the value of them, I can think only of one of my fellow lecturers that knows the value of it (excluding the ones that I have explained it too). This is a conversion that I had with one of my colleagues, when I said "congratulations on your promotion to principal lecturer, as well as a salary increase of course your accrued pension will increase too". He actually said, "my pension isn't worth much, it is only about £1,000 a year". He was actually valuing it at only £1,000  per annum of salary, instead of realising that it is an extra £1,000 pension paid on retirement annually for every year until death (the possibly some to his spouse) that he works. I still don't think he fully understood, when I explained that if he wanted to buy an annuity that paid £1,000 per annum (index linked, with spouse benefits) that it would cos about £37k (depending on the provider).
Personally I do not particularly like annuities though, mainly because when I retire I will have just under £30k of index linked pension and much more income from elsewhere (and my wife's income is significant too). So an annuity just isn't as valuable to me as other alternative investments, as it could be to others on a lower pension income. So, I only use a multiplier of 28.5 (not 37) on my spreadsheet, but the value is very subjective, for someone with lower retirement income, the multiplier would be higher than 28.5. The 37 is a rough figure, I did not do a search of the actual costs of annuities. The only other person who I have discussed pension with (in person, not on a forum) that seems to fully understand the value is my wife, but she is a retired actuary (so obviously she would know the value).

One of my problems (if you can call it that) is that the percentage of DB income is probably too high in my (our) retirement plans. My public sector pension in payment now (police) is just under £31k.  For the rest, my wife has a further £10k in public sector pensions, and I am accruing Civil Service pension with another (£3k roughly) to come - all at 65. We'll have full state pensions adding another £9k each. Where we are short is in DC style pensions, and cash funds to supplement the police pension from when we finish (say 58) until 65. I did consider opting for the Civil Service partnership pension but the Alpha seemed so attractive at my age (54 at the time) so I went for it. We've been piling into our SIPPs to try and bulk them out in order to use that and I'm considering taking the other pensions earlier to smooth out the income a bit.

Like you though, I am aware of the cost of providing such a pension, though it's difficult to assess exact value  - I know it's expensive! Comparing with Annuities is tricky since you can't get one at 51 which is when the pension started. 

Yes as you imply, it is a good 'problem' to have. I'm lucky that I like my job so I don't want to retire early or probably even at state pension age. But I do only currently work on a 0.4  fractional contract, although I am currently discussing moving up to 0.5. Would working on a fractional appointment instead of retiring work for you? The only disadvantage for me (us) is that it limits holidays abroad (off season here, but warm abroad), but because our dog always go were we go, and we are fed up with the long drive from Northern to Southern Spain, that is no longer a concern for us.

Well I am contemplating going part time next year anyway to try it. HRT and 12% NI means I lose 52% of everything above £50k hence why I'm putting a reasonable amount into my SIPP. So part time wouldn't make such a huge difference - other than not putting as much into my SIPP.

NI is 2% over £50k so you lose 42% not 52% over that point.

There’s an anomaly in Scotland where the £43,430-£50,000 element is taxed at 53% due to the stupid SNP government that overlooked the fact income tax was devolved but not NI. 

garmeg

CSL0183 said:

garmeg said:

jimi_man said:

chucknorris said:

jimi_man said:

chucknorris said:

michaels said:

CSL0183 said:

michaels said:

CSL0183 said:

michaels said:

CSL0183 said:

Employee gets paid £60k pa and has a 10% matched contribution with the employer known as Salary Sacrifice. Effectively the employee is agreeing to take a pay cut to £54k and the employer contributes the £12k into the fund. That’s the way the current SS scheme works. 

If the government tried to close it down and make it “Illegal” then what’s to stop the employer to say this position is now £54k and your pension is now entirely non contributory. £12k still goes into your fund free of any employers taxation and that way your pension is now non contributory. 

If they then try to close this loophole and make employers contributions a benefit in kind then my previously raised points crop up. The same would then need to be applied to the public sector and there would be huge fallout. 

This is far from easy. 

We all know that they will claim to have raised the tax relief form 20% to 25% on pension contributions but that this will include all contributions whether they are employer or employee and regardless of the tax band of the employee.  The only pensions not impacted will be defined benefit 'to encourage this form of provision'

Agreed, I can see the Government propaganda machine in overdrive trying to convince everyone that 20-25% is a good thing. However, suspect the media will pick up on the fact that their take home pays will Infact drop as a result if they had previously been getting 32% relief. That along with the fallout from the higher rate taxpayers. 

It could stifle the economy to be fair. People could continue with their normal contributions and take the hit in take home pay or they can reduce their pension contribution so that they are no worse off take home pay wise. Either way, spending power is reduced now or in the future. 

So the govt gets more revenue now (to spend on election bribes) at the expense of less in the future when whichever party is in charge it won't be the same politicians...now tell what the downside is for the current gov?

They won’t make another term, they will lose their core middle class vote due to the double taxation if HRT relief is cut and if they go after the public sector schemes, they would lose a lot of votes there too. In addition, if they are making millions of basic rate taxpayers worse off by scrapping SS, there’s votes to be lost there too. 

So yeah, losing millions of votes would be the downside about a pensions tax raid. 

I am yet to meet a public sector worker who has a clue just how much their DB pension is worth and similarly if private sector workers see the same deductions each month so take home pay doesn't change but 20% less is going into their pension the majority will not have a clue.

In reality the unions would kick off if DB pensions were hit so no doubt an exception will be made for these.  they are already grossly unfair so making them even more unfair will not really be noticed by the majority.

Although I know exactly the benefit of my TPS (Teachers Pension Scheme) pension, you are right that many do not realise the value of them, I can think only of one of my fellow lecturers that knows the value of it (excluding the ones that I have explained it too). This is a conversion that I had with one of my colleagues, when I said "congratulations on your promotion to principal lecturer, as well as a salary increase of course your accrued pension will increase too". He actually said, "my pension isn't worth much, it is only about £1,000 a year". He was actually valuing it at only £1,000  per annum of salary, instead of realising that it is an extra £1,000 pension paid on retirement annually for every year until death (the possibly some to his spouse) that he works. I still don't think he fully understood, when I explained that if he wanted to buy an annuity that paid £1,000 per annum (index linked, with spouse benefits) that it would cos about £37k (depending on the provider).
Personally I do not particularly like annuities though, mainly because when I retire I will have just under £30k of index linked pension and much more income from elsewhere (and my wife's income is significant too). So an annuity just isn't as valuable to me as other alternative investments, as it could be to others on a lower pension income. So, I only use a multiplier of 28.5 (not 37) on my spreadsheet, but the value is very subjective, for someone with lower retirement income, the multiplier would be higher than 28.5. The 37 is a rough figure, I did not do a search of the actual costs of annuities. The only other person who I have discussed pension with (in person, not on a forum) that seems to fully understand the value is my wife, but she is a retired actuary (so obviously she would know the value).

One of my problems (if you can call it that) is that the percentage of DB income is probably too high in my (our) retirement plans. My public sector pension in payment now (police) is just under £31k.  For the rest, my wife has a further £10k in public sector pensions, and I am accruing Civil Service pension with another (£3k roughly) to come - all at 65. We'll have full state pensions adding another £9k each. Where we are short is in DC style pensions, and cash funds to supplement the police pension from when we finish (say 58) until 65. I did consider opting for the Civil Service partnership pension but the Alpha seemed so attractive at my age (54 at the time) so I went for it. We've been piling into our SIPPs to try and bulk them out in order to use that and I'm considering taking the other pensions earlier to smooth out the income a bit.

Like you though, I am aware of the cost of providing such a pension, though it's difficult to assess exact value  - I know it's expensive! Comparing with Annuities is tricky since you can't get one at 51 which is when the pension started. 

Yes as you imply, it is a good 'problem' to have. I'm lucky that I like my job so I don't want to retire early or probably even at state pension age. But I do only currently work on a 0.4  fractional contract, although I am currently discussing moving up to 0.5. Would working on a fractional appointment instead of retiring work for you? The only disadvantage for me (us) is that it limits holidays abroad (off season here, but warm abroad), but because our dog always go were we go, and we are fed up with the long drive from Northern to Southern Spain, that is no longer a concern for us.

Well I am contemplating going part time next year anyway to try it. HRT and 12% NI means I lose 52% of everything above £50k hence why I'm putting a reasonable amount into my SIPP. So part time wouldn't make such a huge difference - other than not putting as much into my SIPP.

NI is 2% over £50k so you lose 42% not 52% over that point.

There’s an anomaly in Scotland where the £43,430-£50,000 element is taxed at 53% due to the stupid SNP government that overlooked the fact income tax was devolved but not NI. 

I was responding to the £50k plus comment to state that this level is not tax and NI'd at 52%.

hugheskevi

garmeg said:

CSL0183 said:

garmeg said:

jimi_man said:

Well I am contemplating going part time next year anyway to try it. HRT and 12% NI means I lose 52% of everything above £50k hence why I'm putting a reasonable amount into my SIPP. So part time wouldn't make such a huge difference - other than not putting as much into my SIPP.

NI is 2% over £50k so you lose 42% not 52% over that point.

There’s an anomaly in Scotland where the £43,430-£50,000 element is taxed at 53% due to the stupid SNP government that overlooked the fact income tax was devolved but not NI. 

I was responding to the £50k plus comment to state that this level is not tax and NI'd at 52%.

jimi_man has a police pension in payment of £31,000 and also an employment covered by the Civil Service pension scheme, from his post earlier in the thread.

Assuming no other income, he would face a 52% (40% income tax, 12% National Insurance) tax rate if his salary is over £20K but under £50K - this would make him subject to the 40% higher rate of income tax from his combined pension and salary income, but as pension income is not subject to National Insurance he would only pay 2% National Insurance if his salary exceeds £50K.

garmeg

hugheskevi said:

garmeg said:

CSL0183 said:

garmeg said:

jimi_man said:

Well I am contemplating going part time next year anyway to try it. HRT and 12% NI means I lose 52% of everything above £50k hence why I'm putting a reasonable amount into my SIPP. So part time wouldn't make such a huge difference - other than not putting as much into my SIPP.

NI is 2% over £50k so you lose 42% not 52% over that point.

There’s an anomaly in Scotland where the £43,430-£50,000 element is taxed at 53% due to the stupid SNP government that overlooked the fact income tax was devolved but not NI. 

I was responding to the £50k plus comment to state that this level is not tax and NI'd at 52%.

jimi_man has a police pension in payment of £31,000 and also an employment covered by the Civil Service pension scheme, from his post earlier in the thread.

Assuming no other income, he would face a 52% (40% income tax, 12% National Insurance) tax rate if his salary is over £20K but under £50K - this would make him subject to the 40% higher rate of income tax from his combined pension and salary income, but as pension income is not subject to National Insurance he would only pay 2% National Insurance if his salary exceeds £50K.

I was only considering earned income.

badmemory

Dazed_and_C0nfused said:

badmemory said:

By £62.50, if you are a 20% tax payer that is just over £1 a month.

Apparently it gets rounded up to the nearest £10 so will actually be £12,570, a whole £1.16/month 

https://www.icaew.com/insights/tax-news/2020/nov-2020/income-tax-personal-allowance-and-national-insurance-limits-for-202122

Rich beyond the dreams of avarice (a quote from somewhere but no idea where)  Thanks for that D & C.

AlanP_2

Would you prefer higher inflation so that you get a higher tax code?