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?

[newmodarmy]

Hymieuf someone paid su h huge amounts in fo a long time they'd have a very frugal/ poor lifestyle until retirement and would probably amass a pot so big they'd pay 40% tax on their pension too. So no gain.

[ToraToraTora]

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.

 

 

[Hymie]

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.

[ToraToraTora]

Hymie, why do you think people should pay 40% direct tax? A percentage for us all is fair and if you earn more you pay more. Why do you want to clobber people with a higher percentage even though they are already paying more if they earn more? You seem obsessed.

[Hymie]

If you don’t like paying a 40% tax rate on income over £50k, you should have been complaining to the Tories who have been in power for the last 14 years – and had the power to change this.

[ToraToraTora]

No one likes paying tax especially the 40% part. I would be interested in why you seem obsessed with the 40% band and the prevention of its avoidance.

[ToraToraTora]

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.

[newmodarmy]

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.

[lolasmam]

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.

[Hymie]

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.

[ToraToraTora]

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.

[THECORBYLOON]

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.