Potential capping of Salary Sacrifice (speculation)?

Linton

michaels said:

Aretnap said:

prowla said:

We've had many years of being told that the State Pension isn't sustainable...

Who has been telling you that? Certainly not the government - the trend for the last 15 years, and apparently for the foreseeable future, has been for the state pension to increase massively in real terms, not decrease because it's unsustainable. Do not mistake noisy people on the internet for government policy.

The triple lock was introduced in 2016.  In 2025 money terms the basic state pension was £174.10 (RPI).  It is now £176.45.  So about 1% more than inflation over 10 year is not 'massively in real terms' imho

The triple lock was introduced in 2011.  For the effect of the triple lock see here which gives a rather different picture.  The problem seems to be that inflation and wage increases have been to some extent out of phase particularly over COVID.  Wages increase one year which causes inflation to rise the next year, or vice versa.  Hence pensions get increased by more than either inflation or earnings individually, the same underlying increase being applied twice. . 

zagfles

Cobbler_tone said:

Ultimately people are almost trying to suggest that all pensions should be equal. They are clearly not and a big aspect in the attractiveness of a role. How many times do you hear “the police get a good pension” etc?
Some people only will have known something using SS. Things clearly change, the best example are DB schemes that no longer exist. It might make a few reconsider their current employer if things change, although you could say it might be a leveller. Employers will feel another negative impact too.
Assuming most people can’t afford a big hit on net pay, it will probably translate into smaller pension pots.

Pension offerings by employers, just like any other benefit offerings, clearly won't be equal. That would be ridiculous. But as far as possible, the tax system should aim for equal treatment between someone who gets a good pension from their employer and someone who doesn't but voluntarily contributes extra to get an equally good pension. 

Cobbler_tone

zagfles said:

Cobbler_tone said:

Ultimately people are almost trying to suggest that all pensions should be equal. They are clearly not and a big aspect in the attractiveness of a role. How many times do you hear “the police get a good pension” etc?
Some people only will have known something using SS. Things clearly change, the best example are DB schemes that no longer exist. It might make a few reconsider their current employer if things change, although you could say it might be a leveller. Employers will feel another negative impact too.
Assuming most people can’t afford a big hit on net pay, it will probably translate into smaller pension pots.

Pension offerings by employers, just like any other benefit offerings, clearly won't be equal. That would be ridiculous. But as far as possible, the tax system should aim for equal treatment between someone who gets a good pension from their employer and someone who doesn't but voluntarily contributes extra to get an equally good pension. 

I agree to a point. There is a lot more disparity between roles and organisations though. You could have a junior manager on £30k a year, or £60k in our business for a similar role.
I’m not sure how you get equal tax treatment in isolation with pensions when there are so many. Maybe this will level the playing field. DB’s are totally different and not sure how you ever address that. Maybe in 20 years they won’t exist.

michaels

Linton said:

michaels said:

Aretnap said:

prowla said:

We've had many years of being told that the State Pension isn't sustainable...

Who has been telling you that? Certainly not the government - the trend for the last 15 years, and apparently for the foreseeable future, has been for the state pension to increase massively in real terms, not decrease because it's unsustainable. Do not mistake noisy people on the internet for government policy.

The triple lock was introduced in 2016.  In 2025 money terms the basic state pension was £174.10 (RPI).  It is now £176.45.  So about 1% more than inflation over 10 year is not 'massively in real terms' imho

The triple lock was introduced in 2011.  For the effect of the triple lock see here which gives a rather different picture.  The problem seems to be that inflation and wage increases have been to some extent out of phase particularly over COVID.  Wages increase one year which causes inflation to rise the next year, or vice versa.  Hence pensions get increased by more than either inflation or earnings individually, the same underlying increase being applied twice. . 

True.  However if you use RPI not CPI then there has been pretty much no real terms increase.

michaels

Grumpy_chap said:

Changing SS for the worse would quite likely result in less overall funding to pensions.
Less well funded pensions has a counter-effect for the Government in that people do not then have funds to finance their care when the need arises for later life so this would require the future Government to step in and fund.
All more than a simple assessment.

I don't see it, those who can afford big pots will work longer or retire with less but this is likely to have minimal impact in paying for care.  I really can't see that we should be spending billions more on giving tax breaks for the retirement of those on above average incomes than we do on those on below average incomes.  I think everyone should get the same absolute value not proportion of tax break.

michaels

GunJack said:

Cobbler_tone said:

Ultimately people are almost trying to suggest that all pensions should be equal. They are clearly not and a big aspect in the attractiveness of a role. How many times do you hear “the police get a good pension” etc?
Some people only will have known something using SS. Things clearly change, the best example are DB schemes that no longer exist. It might make a few reconsider their current employer if things change, although you could say it might be a leveller. Employers will feel another negative impact too.
Assuming most people can’t afford a big hit on net pay, it will probably translate into smaller pension pots.

You make a good point about net pay and the knock-on effect on pension savings. That would force more people into having to work more years than planned for (quite possibly myself included) AND have a smaller DC than planned...at least relief at source wouldnt be as bad.

And for government revenue this is the big win, an extra year of work by someone at the peak of their earnings is a huge win for tax take.  With doctors it is attempted to tax them less to make them carry on longer but if you could achieve the same effect by taxing then more then double bubble win.

westv

zagfles said:

Cobbler_tone said:

Ultimately people are almost trying to suggest that all pensions should be equal. They are clearly not and a big aspect in the attractiveness of a role. How many times do you hear “the police get a good pension” etc?
Some people only will have known something using SS. Things clearly change, the best example are DB schemes that no longer exist. It might make a few reconsider their current employer if things change, although you could say it might be a leveller. Employers will feel another negative impact too.
Assuming most people can’t afford a big hit on net pay, it will probably translate into smaller pension pots.

Pension offerings by employers, just like any other benefit offerings, clearly won't be equal. That would be ridiculous. But as far as possible, the tax system should aim for equal treatment between someone who gets a good pension from their employer and someone who doesn't but voluntarily contributes extra to get an equally good pension. 

The tax system does offer equal treatment. It"s down to the employer as to whether they can be bothered to offer SS or not.

kinger101

michaels said:

Grumpy_chap said:

Changing SS for the worse would quite likely result in less overall funding to pensions.
Less well funded pensions has a counter-effect for the Government in that people do not then have funds to finance their care when the need arises for later life so this would require the future Government to step in and fund.
All more than a simple assessment.

I don't see it, those who can afford big pots will work longer or retire with less but this is likely to have minimal impact in paying for care.  I really can't see that we should be spending billions more on giving tax breaks for the retirement of those on above average incomes than we do on those on below average incomes.  I think everyone should get the same absolute value not proportion of tax break.

I don't.  It's not tax relief.  It's tax deferral.  The income is still subject to income tax when it comes out of the pension.  Fair enough, it might be at basic rather than higher rate, but the government is benefiting for all the growth within the pension pot.

If I were only getting basic rate relief on my pension contributions then I would likely use my ISA instead.  Which means none of the growth would be subject to tax (other than IHT) whereas it is under a pension scheme, albeit when I withdraw it.

af1963

michaels said:

Linton said:

michaels said:

Aretnap said:

prowla said:

We've had many years of being told that the State Pension isn't sustainable...

Who has been telling you that? Certainly not the government - the trend for the last 15 years, and apparently for the foreseeable future, has been for the state pension to increase massively in real terms, not decrease because it's unsustainable. Do not mistake noisy people on the internet for government policy.

The triple lock was introduced in 2016.  In 2025 money terms the basic state pension was £174.10 (RPI).  It is now £176.45.  So about 1% more than inflation over 10 year is not 'massively in real terms' imho

The triple lock was introduced in 2011.  For the effect of the triple lock see here which gives a rather different picture.  The problem seems to be that inflation and wage increases have been to some extent out of phase particularly over COVID.  Wages increase one year which causes inflation to rise the next year, or vice versa.  Hence pensions get increased by more than either inflation or earnings individually, the same underlying increase being applied twice. . 

True.  However if you use RPI not CPI then there has been pretty much no real terms increase.

RPI hasn't been a national statistic for over a decade, because of the inherent flaws in the method:

https://www.ons.gov.uk/economy/inflationandpriceindices/articles/shortcomingsoftheretailpricesindexasameasureofinflation/2018-03-08

prowla

Aretnap said:

prowla said:

We've had many years of being told that the State Pension isn't sustainable...

Who has been telling you that? Certainly not the government - the trend for the last 15 years, and apparently for the foreseeable future, has been for the state pension to increase massively in real terms, not decrease because it's unsustainable. Do not mistake noisy people on the internet for government policy.

I certainly don't mistake noisy people on the internet for anything other than noisy people on the internet; present company included.
However, for the hard of hearing (or reading)...

From https://ifs.org.uk/publications/future-state-pension

• 1    The ageing population will add considerable pressure on public finances in coming decades. According to the Office for Budget Responsibility (OBR), under current population projections and government policy (maintaining the triple lock and the state pension age rising to 68 by 2046), spending on the state pension, pension credit and winter fuel payment is expected to rise by 1.2% of national income (£32 billion per year in today’s terms) by 2050. One key driver of this is that there are expected to be 25% more pensioners in 2050 than today, with another driver being how the state pension is indexed. The pressures due to health and social care are much bigger, with spending projected to rise by 4.1% of national income (£105 billion per year in today’s terms) over the same period. 

From https://www.pensionsuk.org.uk/news/article/state-pension-age-should-not-be-increased-without-a-corresponding-improvement-in-healthy-life-expectancy

• Pensions UK recommends establishing a clear adequacy level for the State Pension, ensuring it meets the minimum income standards necessary for a decent retirement. Once this baseline is achieved, consideration should be given to transitioning the Triple Lock to a more sustainable uprating mechanism. This approach would balance the need for adequate pension income with fiscal responsibility, ensuring the long-term sustainability of the State Pension system.

From https://www.saga.co.uk/money-news/is-the-state-pension-heading-for-a-crisis

• Figures from the Office for Budget Responsibility (OBR) show that while annual spending was around 2% of GDP in the mid-20th century, it has increased to around 5% of GDP, around £140bn. 

  And this figure is only set to get bigger. OBR projections suggest that, by the 2070s, the bill for the state pension will be 7.7% of GDP.

From https://www.gov.uk/government/calls-for-evidence/third-state-pension-age-review-independent-report-call-for-evidence/third-state-pension-age-review-independent-report-call-for-evidence

• 2.8. The current legislated timetable is for State Pension age to rise to 67 between 2026 and 2028 and 68 between 2044 and 2046.
• 3.13. People are also living longer lives. Figure 3 shows that the number of people aged 85 years and over is expected to increase by 189% over the next 50 years, rising from 1.8 million people in 2025 to 5.1 million by 2075.
• 3.20. The OBR forecast that State Pension expenditure as a per cent of GDP will reach 7.7 % of GDP by the early 2070s, around 50% higher than today. This increase comes despite currently legislated increases to the State Pension.

The very act of increasing the retirement age shows that it was not deemed "sustainable".

From https://dictionary.cambridge.org/dictionary/english/sustainable

• sustainable: able to continue at the same level for a period of time.

Hope that helps (and wasn't too noisy).