Labour's LTA plans?

Ganga

RogerPensionGuy said:

I think 16 years of playing ⚽️ pensions has unfortunately made it hard to plan and switched lots of pressure off.

I think some current pension rules and the complicated various different and conflicting protections have many good and bad points now and over the ⚽️ years has made winners and loosers. 

I think if Labour get in to power at the election, they hopefully won't start changing pensions stuff straight away, maybe a statement of doing nothing whilst they get a review and proper consideration and anymore changes are sensible and allow and explain protections or lock-ins for when the ⚽️ game starts again as it obviously needs sensible tweeks.

What are the footballs for ?

zagfles

QrizB said:

german_keeper said:

But who are these people who live the life of Reilly at taxpayer's expense?

Fraud aside, there aren't any. But it's a popular trope used by politicians and newspapers for agitating the middle classes.

A bit like Schrodinger's Immigrant, who is simultaneously "over here stealing our jobs" while "lounging around on benefits".

I've not heard the "stealing jobs" trope since Alf Garnett's day! Except in irony or as a strawman to agitate Guardian readers    It would be a bit silly these days when crops are rotting in fields due to lack of workers.

Mind you these days "Schrodinger's immigrant" seems to be both Christian and Muslim at the same time!

Grumpy_chap

Albermarle said:

If I was Chancellor I would have my eye on salary sacrifice for pension contributions, which costs the Treasury increasing Billions each year. Although I understand technically it would not be simple to do that.

I may have missed something, but AIUI, SS for pensions only makes a difference in short term tax take to the extent to which NI is mitigated.
If pension contributions are made outside of SS, there is still income tax relief on the contribution.  Also still avoids the "cliff edges" of £100 k (withdrawal of personal allowance, child care) or £50k (HICBIC) as appropriate.

zagfles

Malthusian said:

german_keeper said:

But who are these people who live the life of Reilly at taxpayer's expense? My understanding of the system is that unless you satisfy certain criteria in order to continue to receive benefits you have to jump through lots of hoops. You have to keep detailed records of all the steps you have taken to find work, be prepared to travel up to an hour and a half to find work and essentially be prepared to do any kind of work. Effectively looking for work is a full time job. Or am I just being naive?

You're talking about unemployment benefits; long-term benefit claimants are on disability. Which is also not easy to claim, but for different reasons. Either way, anyone "living the life of Reilly" on any kind of benefit is almost certainly working under the table. 

And this is beside the original point, which was State Pension. State Pension is an age-restricted universal basic income and paid to anyone who passes a certain age, regardless of how much money they have, with no hoops to jump through. 

UK State Pension costs £112.5 billion a year, so if you reintroduced the LTA, raised £800 million a year and put it all towards the State Pension, you would (in simplistic terms) expect an increase of £1.45 a week.

Those on disability benefits can get a reasonable amount especially those whose disability doesn't add much extra expense (for some their disability reduces expenditure as there a lot of stuff they can't do - in the same was as people expect their expenditure to decline when they get into their late 80's/90's). Not the "life of Reilly" maybe, which is really another strawman, but as in the thread about living just on the state pension, some people manage very well on a low income.

zagfles

bolwin1 said:

I'd have thought the most obvious thing for Labour would be to either;
1. Change the rule to make all inherited pensions taxable, not just if the deceased holder was over 75 and / or
2. Make them liable for inheritance tax. 
Given most of the unions, doctors, teachers etc. will be concerned about DB pensions, this wouldn't impact them, so there'd be little noise.

Yes, another thing might be something like raise higher rate tax by 2% but get rid of the 2% NI on income over £50k. This would be neutral for workers as the extra tax would cancel with the NI saving, but it would mean those with pension/unearned income over £50k would pay more tax, which is very approximately the level of income you'd expect if above the LTA.

zagfles

Albermarle said:

bolwin1 said:

I'd have thought the most obvious thing for Labour would be to either;
1. Change the rule to make all inherited pensions taxable, not just if the deceased holder was over 75 and / or
2. Make them liable for inheritance tax. 
Given most of the unions, doctors, teachers etc. will be concerned about DB pensions, this wouldn't impact them, so there'd be little noise.

Point 1) is an obvious target as the pre 75 loophole does not really make much sense anyway.

Point 2) is more tricky legally but there are some ideas floating around for limiting the ability to hide pension pots away from IHT, as opposed to making them 100% liable.

If I was Chancellor I would have my eye on salary sacrifice for pension contributions, which costs the Treasury increasing Billions each year. Although I understand technically it would not be simple to do that.

Why do you think takling sal sac would be technically difficult when they've already done it, in 2017! Pensions were specifically excluded, so they would just need to remove the exclusion.

However it would be incredibly unfair that someone with a gold plated public sector DB scheme could get the equivalent of 30%+ employer contributions tax and NI free whereas someone with a minimum AE scheme couldn't sal sac to create an equivalent employer contribution.

But they could limit sal sac to a % of earnings, perhaps the equivalent of the most generous public sector DB scheme.

zagfles

Grumpy_chap said:

Albermarle said:

If I was Chancellor I would have my eye on salary sacrifice for pension contributions, which costs the Treasury increasing Billions each year. Although I understand technically it would not be simple to do that.

I may have missed something, but AIUI, SS for pensions only makes a difference in short term tax take to the extent to which NI is mitigated.
If pension contributions are made outside of SS, there is still income tax relief on the contribution.  Also still avoids the "cliff edges" of £100 k (withdrawal of personal allowance, child care) or £50k (HICBIC) as appropriate.

Close to 25% saving in NI (inc employer NI) for a basic rate taxpayer, that's more than the tax relief they get!

MetaPhysical

Leaving the LFA to one side, still lot's of nasties that an incoming Labour government could pull out of a hat - or even the Conservatives if they got re-elected.  A combination of some or all of these things:-
1. Make Pensions subject to NI
2. Abolish the Tax free lump sum
3. Drastically lower the TFLS amount
4. Impose a "windfall" on any TFLS above say 100k at a rate of say 10%
5. Abolish tax free status of pensions inheritance under 75.

None of these would elicit that much political risk since people subjected to such taxes are a soft political target.

zagfles

MetaPhysical said:

Leaving the LFA to one side, still lot's of nasties that an incoming Labour government could pull out of a hat - or even the Conservatives if they got re-elected.  A combination of some or all of these things:-
1. Make Pensions subject to NI
2. Abolish the Tax free lump sum
3. Drastically lower the TFLS amount
4. Impose a "windfall" on any TFLS above say 100k at a rate of say 10%
5. Abolish tax free status of pensions inheritance under 75.

None of these would elicit that much political risk since people subjected to such taxes are a soft political target.

Seriously? Pensioners are good voters. 1-4 would be massive political risks. 5 not so much.

Beside I'm sure the TFLS is used to reduced cost on public sector DB schemes, they often offer rubbish commutation rates but people still take them.

Malthusian

Albermarle said:

bolwin1 said:

I'd have thought the most obvious thing for Labour would be to either;
1. Change the rule to make all inherited pensions taxable, not just if the deceased holder was over 75 and / or
2. Make them liable for inheritance tax. 
Given most of the unions, doctors, teachers etc. will be concerned about DB pensions, this wouldn't impact them, so there'd be little noise.

Point 1) is an obvious target as the pre 75 loophole does not really make much sense anyway.

Dying well before your average life expectancy isn't much of a "loophole". The purpose of pre 75 tax free death benefits is to avoid snatching bread out of the mouths of the widow(er)s and orphans of those who have died young. 

If pre 75 death benefits were taxable, it could punish people for dying early because the tax for their pension being paid out as a lump sum could be considerably higher than if they'd drawn it in retirement. (Drawdown could mitigate this but not everyone is aware this is an option.)

Bear in mind that if you make pre 75 death benefits taxable you also need to make terminal illness withdrawals (serious ill health lump sums) taxable as well. 

If there's a loophole it's in the tax-advantaged status of pension funds after 75 which allows them to be passed down the generations with no immediate tax applying, and tax only paid when the beneficiaries choose to take it out.