Tax on wealth suggested

Thrugelmir

IanManc said:

It's not a Royal Commission set up by the government, but a pressure group calling itself a Commission. A bit like "Independent SAGE" is a pressure group made up of people who disagreed with the people who the Government chose to give it advice about Covid by being members of SAGE.

Dig deeper and you'll find political motives.  Far from being independent.  You'll notice that the Government has been criticised for being wrong at every step. As was sugggested on one radio phone in. Prof. Allyson Pollock at Newcastle University would have been achieved more by telling her students how to behave !

coyrls

thegentleway said:

A._Badger said:

thegentleway said:

zagfles said:

thegentleway said:

Black_Cat2 said:

Being taxed on how much your pension is worth seems unfair to me (if I read this correctly?).  We are encouraged to pay what we can into one to support our retirement so how is it then fair to bring in a tax on it now?  DC and DB pensions meant you sacrifice your salary to be entitled to them and take the gamble that your hard earned money may go up as well as down 🤔

I'm the first to admit I've probably missed the point lol, be kind 😘

You can use that argument to make out all taxation is unfair. E.g. I work hard at my job so it’s unfair that the government takes a cut of my income.
This kind of selfish greedy thinking doesn’t consider how to pay for defence, healthcare, infrastructure, etc... that we all benefit from. Without government expenditure you wouldn’t have a job or a pension in the first place. 

No it isn't. The PPs point seems to be that we are encouraged to support ourselves in retirement by paying into a pension, if the government keep changing the goalposts about how they're taxed etc then that's similar to retrospective taxation, and it will cause people to lose faith in pension savings. Nothing at all like whinging about taxes on employment income. If the govt put taxes on employment income up then people can decide eg not to work overtime etc in the future because it's not worth it. Rather than retrospectively getting a bill for extra tax on the overtime they worked in the past.

You’re welcome to your opinion but I think it’s the same logic:
you can’t tax pension coz you discourage people saving for retirement is the same as you can’t tax higher earners more coz you discourage hard work and career progression. It’s the same very weak argument against taxation which you can apply to anything you don’t want taxed.

In what way is it a weak argument? I have known more than a few tradesmen and small business owners who have consciously avoided growing or expanding their businesses because 'it's not worth it'. High taxation is a very real disincentive. It also encourages tax evasion so tends to be self-defeating. 

I'm genuinely confused as to how 1% tax could be construed as high taxation? Compare UK tax to other countries and you'll see it's low.

Somebody retired and living in London in a house worth £1M and a DC pension that they withdraw at 4% per year, a tax of 1% on the value of the pension is then equivalent to an additional 25% tax (with no personal allowance) on a year's income from their DC pension.

garmeg

Presumably accrued public sector defined benefit pensions would have to be given a value for the purpose of this exercise?

A true market value, not an LTA or AA notional value.

arnoldy

garmeg said:

Presumably accrued public sector defined benefit pensions would have to be given a value for the purpose of this exercise?

A true market value, not an LTA or AA notional value.

Yes I agree. Also plenty of fat to cut in public sector (especially Quango feeding frenzy)  before rises in tax. One example amongst literally thousands of examples of waste: cash strapped NHS paying for gender reassignment of school kids??!! - and the staff even get public sector DB pension for this scandal - paid for in part by min wage private sector. 

TC56_803_9

thegentleway said:

TC56_803_9 said:

thegentleway said:

Grumpy_chap said:

• For most 20-something couples setting out on life's great big adventures, having "wealth" of £1m is very likely an impossible dream.

You’re grossly underestimating the power of compound interest. A couple of 20 year olds only need to invest £50 a month each to have a million by retirement age! 

24 year olds investing and never removing a penny for 43 years putting in £100 per month between them need an annulised return of 11.25% to achieve £1m.  That will require elements of risk well beyond anything guaranteed by the FSC.  And with that risk there are winners and there are losers.  

That’s because you’ve stolen 3 years of compounding! I said a 20 year old and retirement age (currently 66)
£100 a month for 46 years at 10% (historical yearly return) gets you a million. If you want to do it in 43 years you’ll need £134 a month. Whichever way you look at it’s hardly an impossible dream.

The OP of this stated 20 somethings.  You might interpret that as 20 year olds. Being fair I could have gone for a mid 25 but elected to grant another year of contributions and interest.  Even then the concept is fanciful. 

I was sold two endowments and various pension products and such like with estimates of 10% return (historical yearly return).  Not one of them got anywhere near that - historically  - which was exactly what I thought when I was sold them. The salesman said it would do XXX.  That it will actually do YYY and that YYY is less than XXX is a truism.

thegentleway

kinger101 said:

thegentleway said:

Grumpy_chap said:

thegentleway said:

zagfles said:

thegentleway said:

Black_Cat2 said:

Being taxed on how much your pension is worth seems unfair to me (if I read this correctly?).  We are encouraged to pay what we can into one to support our retirement so how is it then fair to bring in a tax on it now?  DC and DB pensions meant you sacrifice your salary to be entitled to them and take the gamble that your hard earned money may go up as well as down 🤔

I'm the first to admit I've probably missed the point lol, be kind 😘

You can use that argument to make out all taxation is unfair. E.g. I work hard at my job so it’s unfair that the government takes a cut of my income.
This kind of selfish greedy thinking doesn’t consider how to pay for defence, healthcare, infrastructure, etc... that we all benefit from. Without government expenditure you wouldn’t have a job or a pension in the first place. 

No it isn't. The PPs point seems to be that we are encouraged to support ourselves in retirement by paying into a pension, if the government keep changing the goalposts about how they're taxed etc then that's similar to retrospective taxation, and it will cause people to lose faith in pension savings. Nothing at all like whinging about taxes on employment income. If the govt put taxes on employment income up then people can decide eg not to work overtime etc in the future because it's not worth it. Rather than retrospectively getting a bill for extra tax on the overtime they worked in the past.

You’re welcome to your opinion but I think it’s the same logic:
you can’t tax pension coz you discourage people saving for retirement is the same as you can’t tax higher earners more coz you discourage hard work and career progression. It’s the same very weak argument against taxation which you can apply to anything you don’t want taxed.

I don't think it is the same logic.

Anyone can make a decision today on how much work they will choose to do based upon whether it is "worth it" given the level of income tax that will become due today.

Pension assets have been built up based on decisions taken yesterday, so to now apply a "wealth tax" on pensions retrospectively is not the same.  An individual cannot decide to "uncontribute" to their pension now that this tax is a possibility.

Those that do have pension assets have been encouraged to do so by successive Governments as a means to lessen the burden on the tax payer.  If the Government can levy a "one-off" retrospective tax on pension assets then the Government will be able to do that again and again until it becomes the norm.  At this point, future savings into pension funds will diminish and future tax payers will need to provide far higher levels of support to the elderly.  As such, imposing retrospective "wealth" taxes may well end up being counter-productive in terms of overall contribution / burden to the state.

There is a similar challenge in the case of people that chose BTL, or any other form of savings, rather than pension to provide for their old age.

I think the confusion is because you seem to think the pension would be taxed directly? The proposal is to include pensions for the wealth threshold calculations, not tax them directly (I would not be in favour of this either).

If they form part of assets over £1m, then they are taxed directly.  By definition, a wealth tax is a direct tax in that they are levied on the bearer and paid directly to the government.  

It is indeed a direct tax. My point is that it doesn't come out directly of your pension pot. Not counting pension would be inequitable as per the report: “This flows from a horizontal equity argument: individuals of similar means should not be taxed differently because (for example) one owns a house while the other holds cash while they wait to buy a house, or one has their savings in a pension while the other has reinvested their savings in their business.”

thegentleway

coyrls said:

thegentleway said:

A._Badger said:

thegentleway said:

zagfles said:

thegentleway said:

Black_Cat2 said:

Being taxed on how much your pension is worth seems unfair to me (if I read this correctly?).  We are encouraged to pay what we can into one to support our retirement so how is it then fair to bring in a tax on it now?  DC and DB pensions meant you sacrifice your salary to be entitled to them and take the gamble that your hard earned money may go up as well as down 🤔

I'm the first to admit I've probably missed the point lol, be kind 😘

You can use that argument to make out all taxation is unfair. E.g. I work hard at my job so it’s unfair that the government takes a cut of my income.
This kind of selfish greedy thinking doesn’t consider how to pay for defence, healthcare, infrastructure, etc... that we all benefit from. Without government expenditure you wouldn’t have a job or a pension in the first place. 

No it isn't. The PPs point seems to be that we are encouraged to support ourselves in retirement by paying into a pension, if the government keep changing the goalposts about how they're taxed etc then that's similar to retrospective taxation, and it will cause people to lose faith in pension savings. Nothing at all like whinging about taxes on employment income. If the govt put taxes on employment income up then people can decide eg not to work overtime etc in the future because it's not worth it. Rather than retrospectively getting a bill for extra tax on the overtime they worked in the past.

You’re welcome to your opinion but I think it’s the same logic:
you can’t tax pension coz you discourage people saving for retirement is the same as you can’t tax higher earners more coz you discourage hard work and career progression. It’s the same very weak argument against taxation which you can apply to anything you don’t want taxed.

In what way is it a weak argument? I have known more than a few tradesmen and small business owners who have consciously avoided growing or expanding their businesses because 'it's not worth it'. High taxation is a very real disincentive. It also encourages tax evasion so tends to be self-defeating. 

I'm genuinely confused as to how 1% tax could be construed as high taxation? Compare UK tax to other countries and you'll see it's low.

Somebody retired and living in London in a house worth £1M and a DC pension that they withdraw at 4% per year, a tax of 1% on the value of the pension is then equivalent to an additional 25% tax (with no personal allowance) on a year's income from their DC pension.

No because the report suggests that where wealth tax due in respect of pension wealth the payment period would be over five years and, where the taxpayer had difficulty paying, they could apply for a further deferral. You're looking at maximum 5% additional income tax even in your extreme scenario, i.e. still low taxation.

thegentleway

TC56_803_9 said:

thegentleway said:

TC56_803_9 said:

thegentleway said:

Grumpy_chap said:

• For most 20-something couples setting out on life's great big adventures, having "wealth" of £1m is very likely an impossible dream.

You’re grossly underestimating the power of compound interest. A couple of 20 year olds only need to invest £50 a month each to have a million by retirement age! 

24 year olds investing and never removing a penny for 43 years putting in £100 per month between them need an annulised return of 11.25% to achieve £1m.  That will require elements of risk well beyond anything guaranteed by the FSC.  And with that risk there are winners and there are losers.  

That’s because you’ve stolen 3 years of compounding! I said a 20 year old and retirement age (currently 66)
£100 a month for 46 years at 10% (historical yearly return) gets you a million. If you want to do it in 43 years you’ll need £134 a month. Whichever way you look at it’s hardly an impossible dream.

The OP of this stated 20 somethings.  You might interpret that as 20 year olds. Being fair I could have gone for a mid 25 but elected to grant another year of contributions and interest.  Even then the concept is fanciful. 

I was sold two endowments and various pension products and such like with estimates of 10% return (historical yearly return).  Not one of them got anywhere near that - historically  - which was exactly what I thought when I was sold them. The salesman said it would do XXX.  That it will actually do YYY and that YYY is less than XXX is a truism.

Concept isn't fanciful at all. Compounding works, especially for long time frames. You can quibble about the rate of return and the number of years but it's very achievable for 20-25 year old couples to have £1 million by retirement if they start investing small sums monthly.

coyrls

thegentleway said:

coyrls said:

thegentleway said:

A._Badger said:

thegentleway said:

zagfles said:

thegentleway said:

Black_Cat2 said:

Being taxed on how much your pension is worth seems unfair to me (if I read this correctly?).  We are encouraged to pay what we can into one to support our retirement so how is it then fair to bring in a tax on it now?  DC and DB pensions meant you sacrifice your salary to be entitled to them and take the gamble that your hard earned money may go up as well as down 🤔

I'm the first to admit I've probably missed the point lol, be kind 😘

You can use that argument to make out all taxation is unfair. E.g. I work hard at my job so it’s unfair that the government takes a cut of my income.
This kind of selfish greedy thinking doesn’t consider how to pay for defence, healthcare, infrastructure, etc... that we all benefit from. Without government expenditure you wouldn’t have a job or a pension in the first place. 

No it isn't. The PPs point seems to be that we are encouraged to support ourselves in retirement by paying into a pension, if the government keep changing the goalposts about how they're taxed etc then that's similar to retrospective taxation, and it will cause people to lose faith in pension savings. Nothing at all like whinging about taxes on employment income. If the govt put taxes on employment income up then people can decide eg not to work overtime etc in the future because it's not worth it. Rather than retrospectively getting a bill for extra tax on the overtime they worked in the past.

You’re welcome to your opinion but I think it’s the same logic:
you can’t tax pension coz you discourage people saving for retirement is the same as you can’t tax higher earners more coz you discourage hard work and career progression. It’s the same very weak argument against taxation which you can apply to anything you don’t want taxed.

In what way is it a weak argument? I have known more than a few tradesmen and small business owners who have consciously avoided growing or expanding their businesses because 'it's not worth it'. High taxation is a very real disincentive. It also encourages tax evasion so tends to be self-defeating. 

I'm genuinely confused as to how 1% tax could be construed as high taxation? Compare UK tax to other countries and you'll see it's low.

Somebody retired and living in London in a house worth £1M and a DC pension that they withdraw at 4% per year, a tax of 1% on the value of the pension is then equivalent to an additional 25% tax (with no personal allowance) on a year's income from their DC pension.

No because the report suggests that where wealth tax due in respect of pension wealth the payment period would be over five years and, where the taxpayer had difficulty paying, they could apply for a further deferral. You're looking at maximum 5% additional income tax even in your extreme scenario, i.e. still low taxation.

The report says "payable at 1% per year for 5 years"  and so it would either be 25% additional tax for 5 years or if you're saying you have 5 years to pay each year's liability, 5% extra for 25 years.  I don't see why my scenario is extreme; it is very close to my own position.

A pension is there to provide income and will be taxed as income as it is paid; the capital is not available without an income tax liability.  I don't see why it should be treated both as capital and income.

zagfles

thegentleway said:

TC56_803_9 said:

thegentleway said:

TC56_803_9 said:

thegentleway said:

Grumpy_chap said:

• For most 20-something couples setting out on life's great big adventures, having "wealth" of £1m is very likely an impossible dream.

You’re grossly underestimating the power of compound interest. A couple of 20 year olds only need to invest £50 a month each to have a million by retirement age! 

24 year olds investing and never removing a penny for 43 years putting in £100 per month between them need an annulised return of 11.25% to achieve £1m.  That will require elements of risk well beyond anything guaranteed by the FSC.  And with that risk there are winners and there are losers.  

That’s because you’ve stolen 3 years of compounding! I said a 20 year old and retirement age (currently 66)
£100 a month for 46 years at 10% (historical yearly return) gets you a million. If you want to do it in 43 years you’ll need £134 a month. Whichever way you look at it’s hardly an impossible dream.

The OP of this stated 20 somethings.  You might interpret that as 20 year olds. Being fair I could have gone for a mid 25 but elected to grant another year of contributions and interest.  Even then the concept is fanciful. 

I was sold two endowments and various pension products and such like with estimates of 10% return (historical yearly return).  Not one of them got anywhere near that - historically  - which was exactly what I thought when I was sold them. The salesman said it would do XXX.  That it will actually do YYY and that YYY is less than XXX is a truism.

Concept isn't fanciful at all. Compounding works, especially for long time frames. You can quibble about the rate of return and the number of years but it's very achievable for 20-25 year old couples to have £1 million by retirement if they start investing small sums monthly.

It's not "quibbling" about the rate of return, if you get 3%pa real returns then investing £100 per month, even after 50 years you'd only have £137,000. Nowhere near a million. There's no reason to believe that greater returns than that are inevitable or even likely.