Now The Plan Becomes Clear......

[ToraToraTora]

https://www.express.co.uk/finance/personalfinance/1953667/fears-rachel-reeves-is-plotting

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?

[bhg481]

You've got to feel sorry for the hundreds of MPs who will lose their job at the next election due to their leader's dishonesty.

[davebro3]

She probably wasn't but seeing that the Express has suggested it, well maybe...

[davebro3]

//You've got to feel sorry for the hundreds of MPs who will lose their job at the next election//

Not a bit of it! All MPs are chancers - they deserve to lose out if they (their party) don't deliver. A plague on all their houses.

[newmodarmy]

I'm not happy with the WFA cut- I think they just count it as taxable income- but I think some of these other things are worth looking at. The tax free lump sum allowance could be reduced slightly to say 20% or capped at say £50000, although that may be an admin nightmare if people have several pensions. Also it's not unreasonable to me to consider whether it's right that pension values should not be counted as part of the estate for IHT purposes. It's hardly going to make much of a dent in the 'black hole' though, especially if the public sector pay awards continue to be on the generous side.

[Hymie]

I’d like to see the budget limit the tax relief higher rate payers get through their pension contributions – with a flat rate of 20%.

 

This would stop the higher paid (who should pay a higher proportion in tax) from paying extra into a pension (saving 40% tax or more), and then when withdrawing it, paying only 20% tax.

 

No doubt the rich would cry foul; but why should they gain more than the poorly paid (if we are seeking a fairer society).

[New Judge]

"This would stop the higher paid (who should pay a higher proportion in tax) from paying extra into a pension (saving 40% tax or more), and then when withdrawing it, paying only 20% tax."

Income Tax is due when money is received by an individual. Money paid into a pension is not received. It is held in a fund to be disbursed later. It is effectively deferred pay. It is a method of spreading an individual's earnings over his working life and his retired life.

There is no justification for taxing the sums transferred from income directly into a pension scheme as they will be taxed when they are received in the form of payments from the fund. Money should only be taxed once, when it is actually received. 

Your plan would see people on higher incomes effectively paying 20% tax on money they have no access to and then another 20% (or perhaps even 40%, depending on their income in retirement) when they actually receive it. 

Every effort should be made to encourage people to save for a comfortable reirement. The State Pension alone is hopelessly inadequate and your scheme to over tax pension contributions is hardly a recipe to achieve that.

"No doubt the rich would cry foul; but why should they gain more than the poorly paid (if we are seeking a fairer society)."

Any tax cuts or tax advantages are obviously of greater benefit to those who pay the most tax.

[ToraToraTora]

A laudible effort judge but I fear you are trying to crowbar something into an incapable cranium.

[Khandro]

All initiatives from this government is now based on ideology, - outmoded, a priori  Marxism, - take from the rich and give it to the poor - easy, job done !                                                    Which as anyone with a grain of sense and knowledge of history knows doesn't work. 

 

[newmodarmy]

If they restricted pension contributions  tax relief to 20% Hymie I'm pretty sure they'd  get a backlash from, or have to make exceptions for, senior doctors/ consultants, head teachers, maybe MPs and PMs ( keir already has an exemption from the lifetime allowance).

[theshedman]

I know that Labour has ruled out (Government has boxed itself in by ruling out increases to the rates of income tax, National Insurance and VAT) but it wouldn't suprise me at all if they did put one or more of them up and blame the black hole or something else the Tories had done for having to do it.  The black hole alone wont pay for all the pay rises they are handing out.

[newmodarmy]

There are still other things they could do to get round those promises. Like lower the thresholds for 40 and 45%. Most likely though I think is introducing NI contributions on pension income even though recipients may have already paid 45- 50 years by the time they retire.

[THECORBYLOON]

"Most likely though I think is introducing NI contributions on pension income"

What pension income do you mean?

[youngmafbog]

Yours for a start.

[youngmafbog]

TTT, you forgot then take anything left for IHT.

labour scum.

[Hymie]

NJ – this is how the well paid avoid paying 40% tax on their earnings above~ £50k using pension payments.

 

A person earning £100k p.a. would pay 40% on their salary above ~£50k = £20k tax.

 

But if they pay their entire salary above ~£50k into a pension, they will pay no tax on it.

 

Sometime later (when they withdraw their pension), they can take 25% tax free, and then only pay 20% tax if they ensure their annual income is less than ~£50k.

 

So for every £50k (they salt away in a pension) that they would pay 40% tax on (£20k), they only pay £7.5k tax – a very worthwhile tax saving.

 

Currently the only limit on this avoidance scheme is the lifetime pension allowance – which last time I looked was somewhere around £1 million.

 

Only giving well paid persons a 20% tax break on all pension contributions (the same as lower paid), would stop the above tax avoidance method.

[newmodarmy]

I don't understand why you would ask such a question thecorbeyloon but I mean any pension income ( private + state) that is over the threshold for NI. At the moment NI only applies to earned income. They could even roll NI into the Paye process.

[newmodarmy]

Hymie...doyou realise its just their own tax that they are effectively getting put into the pension pot. Newjudge explained it perfectly but you don't seem to take any notice. 

[newmodarmy]

And, Hymie, now I'm no longer paying 40% tax and putting lots in my pensions which I'm starting to draw it makes no difference to me now what the relief rate is so I have no vested interest. But I know we have issues before with senior doctors etc working only part time or leaving early because of pension rules being tightened. Unintended consequences.

[davebro3]

There are obviously things that could be done to simplify the tax regime & possibly iron out some inequities. Need to be careful about unintended consequences though - CF. Gorgon Brown abolishing the 10% rate...

[Hymie]

Shortly NJ will point out the flaw in my above scheme - allowing those earning £100k p.a., to only pay £7.5k tax rather than £20k tax (on their pay above ~£50k).