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First freeze them to death, then nick what remains of their pension. Can you imagine the uproar if a Tory chancellor contemplated such a thing?
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Hymie 09:01 Yes a valid summary, there are however some ommissions.
1) All the money you are talking about does actually belong to the person initially.
2) The government (red or blue) encourage people to save for themselves in this way. That avoids them having to dish out money to them later when they retire.
3) It is emcumbent on all of us to avoid tax where possible.
If you manage to save the pension life time allowance of cira £1 million (via this method), you could take £250k tax free; based on State pension of circa £12k, you could drawdown £38k p.a. (from your pension) only paying 20% tax.
It would take less than 20 years to exhaust the pension pot at this rate.
By doing this, rather than paying 40% tax on £1 million (£400k), you would only pay £150K in tax – saving £250k in tax.
Hymie, I suspect you have spent your working life in dead end jobs earning way below the 40% threshold and thus want to punish those that have prospered into better paid jobs and thus have got into a position where they can pay into a pension and avoid the 40% bracket. You want to punish those people because you could never be one. You are correct that's exactly what I did. Within the rules I paid anything above the threshhold into my pension and then I used the 25% rule to pay off my mortgage. You could have done the same if you'd tried harder at school.
Your maths is right Hymie, assuming the change in the tax system doesn't affect behaviour.. I have no vested interest as I've finished my pension contributions and made a lot of sacrifices along the way- in fact if they do cut the maximum relief to 20% I might pat myself on the back for my wise tax and pension planning (and sacrifices) in previous years.
But I think there would be pushback from those who currently make the most of it - the highly skilled people like senior doctors. If that's a risk they want to take, fine. It's just another disincentive for people to earn over £50K - I have explained before about how I now just stop working for certain weeks/months once my income would put me into the 40% tax band. (Because of the way I work I did sometimes pay 40%tax + NI+student loan (still) so have a marginal rate of 60%. So I turn down work for several weeks at a time. And then companies complain they can't find the skills they need at this level. Looking back, if I hadn't been able to put large chunks of income above the 40% threshold into my pension pot to save the tax, I'd have reduced my hours many years earlier too.
Not all pensioners are the same, and it’s high time we stop generalising. I felt a sense of embarrassment receiving my Winter Fuel Allowance, knowing that my partner and I are relatively well off. That’s why I chose to donate mine to Age UK. I firmly believe the government should consider doubling the Winter Fuel Allowance for those who truly need it as well as scrapping it for those who can manage without it.
Whilst not a millionaire like TTT, towards the end of my fulltime working career, my annual income exceeded ~50k, such that I was paying 40% tax.
After trying harder at school (than most), I then attended higher education for a further four years – and have worked in a professional capacity in engineering ever since.
Everything you assume about me in your post is wrong.
Not everything, you sound like a chip on the shoulder wannabee who likes to punish others for doing a bit better....hang on I just described socialists! PMSL! Anyway great you dipped into the 40% bracket. I don't think you deserved to pay double the basic rate just for prospering enough though. That's the difference me old china.
HYMIE I asked about pensions because you suggested deducting NI and you have said your suggestion includes State Pension.
A National Insurance record is used when considering that person's entitlement to contributory benefits such as the old and new State Pension.
The requirement to make those NI deductions cease when minimum State Pension age is reached.
I don't understand the purpose of having separate NI deducted from State Pensions since it would not improve that idividual's NI contribution record and would be an additional tax.
“I don't understand the purpose of having separate NI deducted from State Pensions since it would not improve that idividual's NI contribution record and would be an additional tax.”
NI is simply an additional tax, Corby. The contributions made bear no relationship to the pension benefits received. For example, a person currently earning at least £6,396 pa but less than £12,585 will pay no NI contributions but will be credited with a “qualifying year” when it comes to calculating his pension. It’s actually somewhat worse than that as some people are credited with a “qualifying year” having received no income whatsoever, but perhaps that's another argument. Meanwhile, somebody earning £100k pa will pay £4,010 in NI contributions. If that situation prevails throughout their working lives and they both achieve the same number of qualifying years, both will receive exactly the same State Pension (assuming neither has made any additional contributions). The link between NI contributions and pension received is so tenuous as to be ridiculous. he reason I believe it is made at all is to fool people into believing that they are contributing towards a pension when in fact all they doing is paying an additional income tax.
“Shortly NJ will point out the flaw in my above scheme”
There’s no flaw in your scheme, Hymie. The 25% tax free lump sum is available to everybody and as I said earlier, all tax advantageous arrangements will be of greatest benefit to those paying the most tax. Somebody paying no tax at all will gain no advantage from them. But their gaining no benefit is scarcely “unfair”. All that is happening is that some people are seeing slightly smaller sums deducted from their income whilst others are seeing no deductions at all.
I don’t understand why you believe that money not received (i.e. that paid into a pension fund) should be taxed at all, let alone at 40%. Speaking generally, the person earning that money has no access to it and cannot do as they please with it. It is part of their lifetime earnings that has been deferred to a time when they need it. It should therefore be taxed at the appropriate rate when it is received. Income tax is precisely that – a tax on income. It is not a tax on earnings.
Everybody should take advantage of any scheme or procedure which enables them to reduce their tax bill to the absolute legal minimum. There is nothing virtuous about paying more tax than you need to. It is simply foolish. Governments (of all persuasions) waste enormous amounts of it and the amounts spent could easily be reduced with the exercise of a little prudence. But none of them seem willing to do that but prefer instead o revel in their announcements of ever increasing – often wasteful - expenditure.
So in the meantime I applaud and admire any and every scheme or arrangement that allows people in every income bracket to reduce the sums they have confiscated. The Prime Minister talks of “those with the broadest shoulders”. Well just 1% of those paying income tax account for fully 30% of the revenue raised by it. I think their shoulders – however broad – are already bearing enough of the load.
NI is simply an additional tax, Corby.
yup - it used to hypothicated ( dedicated in this case to er a Pension and insurance) but now goes into the central kitty ( consolidated fund).
Money bill have a special opening formula and Royal Assent is different Sa majeste remercies ses bons sujets....
( sozza the Roy.... but you know what I mean)
et le veult
and this was slipped into the NI act about 10 y ago
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