Labour's LTA plans?

horsewithnoname

Albermarle said:

horsewithnoname said:

It seems that anything NuLabour say they will do can be taken with a pinch of salt, because they’ll doubtless change it again. 

Unlike the current Govt of course   

Very much like the current government. In fact there is little difference between the two. 

MetaPhysical

zagfles said:

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.

Yes, seriously. Don't construe me saying this as my support for such draconian measures, I'm simply stating things that they could do.There are even more than those as well.  TFLS above 100k?? - not many people get to enjoy sums larger than that.  An easy way to grab revenue.  Tax free inheritance of pension pots and lowering the TFLS are all readily doable.  NI on pensions is more tricky but it could be easily tapered in.

Ciprico

If either party gets too nasty it might create a stampede of wealthy young retirees to head to sunnier climes, sunnier both financially and meteorologically...

zagfles

MetaPhysical said:

zagfles said:

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.

Yes, seriously. Don't construe me saying this as my support for such draconian measures, I'm simply stating things that they could do.There are even more than those as well.  TFLS above 100k?? - not many people get to enjoy sums larger than that.  An easy way to grab revenue.  Tax free inheritance of pension pots and lowering the TFLS are all readily doable.  NI on pensions is more tricky but it could be easily tapered in.

Lowering/abolishing the TFLS would be a political minefield. They would have to have transitional rules in the same way as when the LTA was lowered otherwise it's retrospective taxation. So people with pensions already above 4x the new limit would need to retain at least 25% of their existing pot as TFLS. This would leave them open to accusations of intergenerational unfairness as younger people couldn't build the same TFLS. Plus adding costs to public sector schemes as mentioned.

Pensions subject to NI would be double taxation for those who haven't been able to use sal sac in their working life. They've already paid NI on those earnings, they have to pay it again? And if they pay NI then they'd also have to have the benefits of NI, eg unemployment, bereavement benefits, state pension etc. How would that work? Could a pensioner "seek work" and get JSA? Could they build up further state pension through pension income?

Stuff could be done on inheritance etc. Can't see them doing any of the others. But it's all speculation. 

Personally I think the thing they are most likely to do which will adversely affect pensioners is increase the BoE inflation target, I've seen lots of talk about that. It would make sense from a treasury POV, as it would inflate away govt debt (most isn't index linked), it would allow stealth taxation through freezing limits eg personal allowance, higher rate threshold, TFLS limit etc. It would reduce the impact of the triple lock. And most people don't seem to understand inflation, as we've seen in threads here, with people thinking 5% interest when inflation is 8% is better than 1% interest when inflation is 2%

MetaPhysical

zagfles said:

MetaPhysical said:

zagfles said:

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.

Yes, seriously. Don't construe me saying this as my support for such draconian measures, I'm simply stating things that they could do.There are even more than those as well.  TFLS above 100k?? - not many people get to enjoy sums larger than that.  An easy way to grab revenue.  Tax free inheritance of pension pots and lowering the TFLS are all readily doable.  NI on pensions is more tricky but it could be easily tapered in.

Lowering/abolishing the TFLS would be a political minefield. They would have to have transitional rules in the same way as when the LTA was lowered otherwise it's retrospective taxation. So people with pensions already above 4x the new limit would need to retain at least 25% of their existing pot as TFLS. This would leave them open to accusations of intergenerational unfairness as younger people couldn't build the same TFLS. Plus adding costs to public sector schemes as mentioned.

Pensions subject to NI would be double taxation for those who haven't been able to use sal sac in their working life. They've already paid NI on those earnings, they have to pay it again? And if they pay NI then they'd also have to have the benefits of NI, eg unemployment, bereavement benefits, state pension etc. How would that work? Could a pensioner "seek work" and get JSA? Could they build up further state pension through pension income?

Stuff could be done on inheritance etc. Can't see them doing any of the others. But it's all speculation. 

Personally I think the thing they are most likely to do which will adversely affect pensioners is increase the BoE inflation target, I've seen lots of talk about that. It would make sense from a treasury POV, as it would inflate away govt debt (most isn't index linked), it would allow stealth taxation through freezing limits eg personal allowance, higher rate threshold, TFLS limit etc. It would reduce the impact of the triple lock. And most people don't seem to understand inflation, as we've seen in threads here, with people thinking 5% interest when inflation is 8% is better than 1% interest when inflation is 2%

I agree with everything you say and I do hope they do not do anything so bonkers. But there are "bonkers" policies all over the tax system.  How can two parents on £49k not losing their child benefit but one parent on £60k losing CB be deemed fair????? How can a marginal rate of 60% be justified?  My point is that we cannot discount anything.  Verbage along the lines of "public finances in dire straits" and "those with the broadest shoulders" and even "difficult decisions" etc will all be trotted out to justify some quite harsh measures to those on modest pensions.

Albermarle

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.

AIUI, the loss of employee and employer NI, is costing many Billions in lost revenue to the Treasury.

zagfles

MetaPhysical said:

zagfles said:

MetaPhysical said:

zagfles said:

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.

Yes, seriously. Don't construe me saying this as my support for such draconian measures, I'm simply stating things that they could do.There are even more than those as well.  TFLS above 100k?? - not many people get to enjoy sums larger than that.  An easy way to grab revenue.  Tax free inheritance of pension pots and lowering the TFLS are all readily doable.  NI on pensions is more tricky but it could be easily tapered in.

Lowering/abolishing the TFLS would be a political minefield. They would have to have transitional rules in the same way as when the LTA was lowered otherwise it's retrospective taxation. So people with pensions already above 4x the new limit would need to retain at least 25% of their existing pot as TFLS. This would leave them open to accusations of intergenerational unfairness as younger people couldn't build the same TFLS. Plus adding costs to public sector schemes as mentioned.

Pensions subject to NI would be double taxation for those who haven't been able to use sal sac in their working life. They've already paid NI on those earnings, they have to pay it again? And if they pay NI then they'd also have to have the benefits of NI, eg unemployment, bereavement benefits, state pension etc. How would that work? Could a pensioner "seek work" and get JSA? Could they build up further state pension through pension income?

Stuff could be done on inheritance etc. Can't see them doing any of the others. But it's all speculation. 

Personally I think the thing they are most likely to do which will adversely affect pensioners is increase the BoE inflation target, I've seen lots of talk about that. It would make sense from a treasury POV, as it would inflate away govt debt (most isn't index linked), it would allow stealth taxation through freezing limits eg personal allowance, higher rate threshold, TFLS limit etc. It would reduce the impact of the triple lock. And most people don't seem to understand inflation, as we've seen in threads here, with people thinking 5% interest when inflation is 8% is better than 1% interest when inflation is 2%

I agree with everything you say and I do hope they do not do anything so bonkers. But there are "bonkers" policies all over the tax system.  How can two parents on £49k not losing their child benefit but one parent on £60k losing CB be deemed fair????? How can a marginal rate of 60% be justified?  My point is that we cannot discount anything.  Verbage along the lines of "public finances in dire straits" and "those with the broadest shoulders" and even "difficult decisions" etc will all be trotted out to justify some quite harsh measures to those on modest pensions.

The CB policy is not fair. That was deliberate, it was political. The policy itself was massively popular (something like 80% support), and people/journalists complaining about the unfair anomalies helped the govt by keeping a popular policy in the headlines. Written about it loads here eg https://forums.moneysavingexpert.com/discussion/comment/57679301/#Comment_57679301

But stuff like reducing the TFLS and applying NI to pensions would be massively unpopular and would affect virtually everyone (now or in the future), not just a small minority.

MarkCarnage

I can't see anything that would fly except dealing with inheritance tax issues around pensions, and possibly sal sac to a degree. 
Imposing NI on pensions would essentially be to confirm that NI is really income tax, not what many believe it to be....
Taxing the TFLS is both oxymoronic and moronic. Also retrospective which is never a good thing. 

Even worse would be 'carve outs'/exemptions for politically favoured groups....that just stinks. 

LHW99

zagfles said:

MetaPhysical said:

zagfles said:

MetaPhysical said:

zagfles said:

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.

Yes, seriously. Don't construe me saying this as my support for such draconian measures, I'm simply stating things that they could do.There are even more than those as well.  TFLS above 100k?? - not many people get to enjoy sums larger than that.  An easy way to grab revenue.  Tax free inheritance of pension pots and lowering the TFLS are all readily doable.  NI on pensions is more tricky but it could be easily tapered in.

Lowering/abolishing the TFLS would be a political minefield. They would have to have transitional rules in the same way as when the LTA was lowered otherwise it's retrospective taxation. So people with pensions already above 4x the new limit would need to retain at least 25% of their existing pot as TFLS. This would leave them open to accusations of intergenerational unfairness as younger people couldn't build the same TFLS. Plus adding costs to public sector schemes as mentioned.

Pensions subject to NI would be double taxation for those who haven't been able to use sal sac in their working life. They've already paid NI on those earnings, they have to pay it again? And if they pay NI then they'd also have to have the benefits of NI, eg unemployment, bereavement benefits, state pension etc. How would that work? Could a pensioner "seek work" and get JSA? Could they build up further state pension through pension income?

Stuff could be done on inheritance etc. Can't see them doing any of the others. But it's all speculation. 

Personally I think the thing they are most likely to do which will adversely affect pensioners is increase the BoE inflation target, I've seen lots of talk about that. It would make sense from a treasury POV, as it would inflate away govt debt (most isn't index linked), it would allow stealth taxation through freezing limits eg personal allowance, higher rate threshold, TFLS limit etc. It would reduce the impact of the triple lock. And most people don't seem to understand inflation, as we've seen in threads here, with people thinking 5% interest when inflation is 8% is better than 1% interest when inflation is 2%

I agree with everything you say and I do hope they do not do anything so bonkers. But there are "bonkers" policies all over the tax system.  How can two parents on £49k not losing their child benefit but one parent on £60k losing CB be deemed fair????? How can a marginal rate of 60% be justified?  My point is that we cannot discount anything.  Verbage along the lines of "public finances in dire straits" and "those with the broadest shoulders" and even "difficult decisions" etc will all be trotted out to justify some quite harsh measures to those on modest pensions.

The CB policy is not fair. That was deliberate, it was political. The policy itself was massively popular (something like 80% support), and people/journalists complaining about the unfair anomalies helped the govt by keeping a popular policy in the headlines. Written about it loads here eg https://forums.moneysavingexpert.com/discussion/comment/57679301/#Comment_57679301

But stuff like reducing the TFLS and applying NI to pensions would be massively unpopular and would affect virtually everyone (now or in the future), not just a small minority.

CB policy in a way is anatural consequence of treating people as individuals for tax purposes. Once upon a time (married) couples were treated as a unit, but then there got to be a lot of complaints that the tax office expected the male partner to fill in the forms for both persons. While the form filling didn't necessarily happen that way, HMRC continued to communicate as if it did.

If you want everyone's tax affairs to be dealt with separately, which became more understandable as different family types became more established, then the CB situation sort of follows.

zagfles

LHW99 said:

zagfles said:

MetaPhysical said:

zagfles said:

MetaPhysical said:

zagfles said:

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.

Yes, seriously. Don't construe me saying this as my support for such draconian measures, I'm simply stating things that they could do.There are even more than those as well.  TFLS above 100k?? - not many people get to enjoy sums larger than that.  An easy way to grab revenue.  Tax free inheritance of pension pots and lowering the TFLS are all readily doable.  NI on pensions is more tricky but it could be easily tapered in.

Lowering/abolishing the TFLS would be a political minefield. They would have to have transitional rules in the same way as when the LTA was lowered otherwise it's retrospective taxation. So people with pensions already above 4x the new limit would need to retain at least 25% of their existing pot as TFLS. This would leave them open to accusations of intergenerational unfairness as younger people couldn't build the same TFLS. Plus adding costs to public sector schemes as mentioned.

Pensions subject to NI would be double taxation for those who haven't been able to use sal sac in their working life. They've already paid NI on those earnings, they have to pay it again? And if they pay NI then they'd also have to have the benefits of NI, eg unemployment, bereavement benefits, state pension etc. How would that work? Could a pensioner "seek work" and get JSA? Could they build up further state pension through pension income?

Stuff could be done on inheritance etc. Can't see them doing any of the others. But it's all speculation. 

Personally I think the thing they are most likely to do which will adversely affect pensioners is increase the BoE inflation target, I've seen lots of talk about that. It would make sense from a treasury POV, as it would inflate away govt debt (most isn't index linked), it would allow stealth taxation through freezing limits eg personal allowance, higher rate threshold, TFLS limit etc. It would reduce the impact of the triple lock. And most people don't seem to understand inflation, as we've seen in threads here, with people thinking 5% interest when inflation is 8% is better than 1% interest when inflation is 2%

I agree with everything you say and I do hope they do not do anything so bonkers. But there are "bonkers" policies all over the tax system.  How can two parents on £49k not losing their child benefit but one parent on £60k losing CB be deemed fair????? How can a marginal rate of 60% be justified?  My point is that we cannot discount anything.  Verbage along the lines of "public finances in dire straits" and "those with the broadest shoulders" and even "difficult decisions" etc will all be trotted out to justify some quite harsh measures to those on modest pensions.

The CB policy is not fair. That was deliberate, it was political. The policy itself was massively popular (something like 80% support), and people/journalists complaining about the unfair anomalies helped the govt by keeping a popular policy in the headlines. Written about it loads here eg https://forums.moneysavingexpert.com/discussion/comment/57679301/#Comment_57679301

But stuff like reducing the TFLS and applying NI to pensions would be massively unpopular and would affect virtually everyone (now or in the future), not just a small minority.

CB policy in a way is anatural consequence of treating people as individuals for tax purposes. Once upon a time (married) couples were treated as a unit, but then there got to be a lot of complaints that the tax office expected the male partner to fill in the forms for both persons. While the form filling didn't necessarily happen that way, HMRC continued to communicate as if it did.

If you want everyone's tax affairs to be dealt with separately, which became more understandable as different family types became more established, then the CB situation sort of follows.

CB policy does the exact opposite of treating people as individuals for tax! If (stereotypically) the wife gets the CB and the husband is the higher earner earning over £50k, then the husband is being taxed on the wife's income!

Treating people independantly for tax was sold as some great progressive idea to "give women financial independance" etc, but as this and other stuff like the way means tested benefits and tax credits work (where a joint declaration of income is required) it was an obvious con trick. 

Assessing people independantly for tax but jointly for benefits means that non earners can't claim means tested benefits if their partner has a good income, and at the same time can't use their tax allowance against the income the govt expects them to live on (other than the small marriage allowance transfer).