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George Osborne Plots £7Bn Pensions 'raid'

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http://www.telegraph.co.uk/news/politics/georgeosborne/8584227/George-Osborne-plots-7bn-pensions-raid-on-better-off.html

Discussions have begun at the Treasury over the move which would see the axing of tax relief currently paid out on pension contributions by people who pay income tax at the higher rates of 40 per cent and 50 per cent.
Some Conservative MPs expect the axing of higher-rate relief to be merely the first stage in a more extensive and radical plan which would end up with all tax relief – including on contributions made by people paying the basic 20p rate of income tax – being abolished, saving £22 billion a year in total.
A Treasury spokesman said: “All our plans in this area were announced in the Budget and we have no others.”

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Sounds like a great plan: with no tax relief there'd be little point in putting money into a pension where the 'managers' will steal 1% of what's left after they lose 10% of its value in a year.

Exactly - then the lost 10% multiplied up into Billions - they take another cut (for their bonuses) passing the lolly over to one of their other partner banks say in Brazil who are this years (ahem) "winners" - where last year the Brazilians lost 12% off their pension funds which were transferred (with a cut for bonuses) to London <_<

Edited by erranta

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With full tax exemption on imputed rent for owner-occupiers.

Imputed rent is a flawed mental construct, unless you also support to apply imputed rail fares to everyone using a car, for example.

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Sounds like everyone will be piling £££s into houses... again!

Only if they have any left!

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I don't see a problem with that....it is the better off that are getting the big pension tax breaks because they are the only ones that can afford to utilise it...maybe they should be investing their surplus funds in more productive ways otherwise all we will see in later life are the very very rich younger retired where money is no object flitting around all over the world and the very poor old retired with reduced pensions and worn out after a long life of labour. ;)

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Everyone is missing the obvious one here... double taxation.

At the moment you get tax relief on your pension contributions, but when you take your pension you pay tax at the prevailing rate. Taxing pension contributions twice - when earned and when received will make pensions a very inefficient way of saving for retirement.. So if he taxes contributions, he would be very likely to abolish tax at the other end - especially if the government actually wants to encourage pension saving.

Far more likely is taxing contributions for people on higher tax rates when their pension pot has exceeded some pre-defined limit. This would nicely hit many of the over-remunerated corporate class, who often "hide" excess income in a pension, the only downside would be that it wouldn't be retrospectively applied to the likes of Fred the shred.

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I don't see a problem with that....it is the better off that are getting the big pension tax breaks because they are the only ones that can afford to utilise it...maybe they should be investing their surplus funds in more productive ways otherwise all we will see in later life are the very very rich younger retired where money is no object flitting around all over the world and the very poor old retired with reduced pensions and worn out after a long life of labour. ;)

+1

Having our pensions taken away from the thieves that is the city of London can only be a good thing. Let our tax's go straight to pensioners and cut these parasites out of the loop.

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Everyone is missing the obvious one here... double taxation.

At the moment you get tax relief on your pension contributions, but when you take your pension you pay tax at the prevailing rate. Taxing pension contributions twice - when earned and when received will make pensions a very inefficient way of saving for retirement.. So if he taxes contributions, he would be very likely to abolish tax at the other end - especially if the government actually wants to encourage pension saving.

Far more likely is taxing contributions for people on higher tax rates when their pension pot has exceeded some pre-defined limit. This would nicely hit many of the over-remunerated corporate class, who often "hide" excess income in a pension, the only downside would be that it wouldn't be retrospectively applied to the likes of Fred the shred.

...you say that, but how much does a rich person need to live in comfort when they are retired, they have paid for their houses and their kids have been set up with a good education and homes of their own?

...higher rate of tax on pension income should still apply, because if you are able to receive that you will be one of the very lucky few...and should not be complaining imo.

...don't forget many are drawing a good pension and working as well..... ;)

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...you say that, but how much does a rich person need to live in comfort when they are retired, they have paid for their houses and their kids have been set up with a good education and homes of their own?

...higher rate of tax on pension income should still apply, because if you are able to receive that you will be one of the very lucky few...and should not be complaining imo.

...don't forget many are drawing a good pension and working as well..... ;)

You're missing his point. Double taxation be in effect and would make pensions completely unattractive. No-one would use them voluntarily...

...which brings me nicely on to the Auto Enrolment situation coming soon. From next year employers are going to have to start putting their employees into a pension and paying into it. Employees will have to pay into it too, but at first they'll be able to opt out (and so lose their employer's contribution while keeping their own). At first...

How long before people are forced to save in a pension, and it's crap/crapper depending on your viewpoint?

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What sort of nonsense is this asking to tax pension contributions? Why are we so pro taxing responsible actions? I personally think anyone without a pension but sky TV and a mobile phone contract over £80 a year should be taxed as they are obviously not financially literate enough to look after themselves.

Double taxation would kill private pensions.

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What sort of nonsense is this asking to tax pension contributions? Why are we so pro taxing responsible actions? I personally think anyone without a pension but sky TV and a mobile phone contract over £80 a year should be taxed as they are obviously not financially literate enough to look after themselves.

Double taxation would kill private pensions.

......the whole private pensions fiasco should be looked at in more depth, it is a bit like taking your money to a casino and getting charged to get in......you put your money, faith and trust into something that turns out to be something quite different. ;)

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...you say that, but how much does a rich person need to live in comfort when they are retired, they have paid for their houses and their kids have been set up with a good education and homes of their own?

Why not just cap all salaries at £200k? After all, nobody really needs more to live in comfort ;)

The point I was making was that double taxation (which would quickly become triple, quadruple or quintuple taxation as soon as you buy anything...) is an unattractive concept - especially to the richest 5% who typically employ an accountant... ;)

Maybe some kind of sliding scale depending on existing pension pot size would be fairest. The system is is so complex already that a few extra layers of administration will barely be noticed ;)

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Everyone is missing the obvious one here... double taxation.

At the moment you get tax relief on your pension contributions, but when you take your pension you pay tax at the prevailing rate. Taxing pension contributions twice - when earned and when received will make pensions a very inefficient way of saving for retirement.. So if he taxes contributions, he would be very likely to abolish tax at the other end - especially if the government actually wants to encourage pension saving.

That would of course introduce a whole new layer of complexity on the issue of existing vs new pension pots.

Far more likely is taxing contributions for people on higher tax rates when their pension pot has exceeded some pre-defined limit.

Already happens for ordinary people (I don't know about workarounds for special people like those with final salary/grandfather rights). Indeed, the "lifetime limit" has been reduced to £1.5million, which would leave you a long way short of, say, a judge's pension.

This would nicely hit many of the over-remunerated corporate class, who often "hide" excess income in a pension, the only downside would be that it wouldn't be retrospectively applied to the likes of Fred the shred.

The "over-remunerated corporate class" have had their pensions killed off by the market, with annuity rates below half what they were when the Equitable went bust. Final salary aside, the only real 'gold plated' pensions are those of people now in their mid-70s and up. The pension can save tax for a relatively modest number, but the lifetime limit makes that a drop-in-the-ocean for the super-rich like Fred.

Worth bearing in mind, the Torygraph has done a lot of kite-flying of late. This smells of troll :huh:

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Employers are already switching in droves to salary sacrifice type pension schemes to save NI, in affect the emploe dosn't make any pension contributions and takes a lower salary. The employer makes the 100% pension contribution. This will just accelerate the process, and is very hard to regulate against without calling all employer pension contributions a taxable benefit ... if they did that it would affect all pensions, and all employer pension benefits, so all those public sector workers would suddenly be liable to pay tax on their full effective monthly pension contribution, not just the individuals current contribution..

Edited by Snagger

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Employers are already switching in droves to salary sacrifice type pension schemes to save NI, in affect the emploe dosn't make any pension contributions and takes a lower salary. The employer makes the 100% pension contribution. This will just accelerate the process, and is very hard to regulate against without calling all employer pension contributions a taxable benefit ... if they did that it would affect all pensions, and all employer pension benefits, so all those public sector workers would suddenly be liable to pay tax on their effective monthly pension contribution paid by the tax payer etc.

I know people who have been doing this for years. Even better if you can pay yourself dividends. Set you salary to about 7.5K, take 30K in dividends and the reset to pension. Saves all 40% tax and employers NI 13% and employees extra NI 1%. I concluded that Pensions are really only worth it if you can take advanatge of salary sacrifice and are fortunate enough to be a 40% tax payer, otherwise forget it use ISA's and under the matress.

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...you say that, but how much does a rich person need to live in comfort when they are retired, they have paid for their houses and their kids have been set up with a good education and homes of their own?

The basic state pension, even without its package of perks, would be ample for that. Less so for pensioners with rent or mortgage to pay, and/or offspring to support.

...higher rate of tax on pension income should still apply, because if you are able to receive that you will be one of the very lucky few...and should not be complaining imo.

Does apply. My friend who retired earlier this year (aged 70 - he enjoyed his work) had to defer one of his pensions to avoid paying higher-rate tax this year, which would have triggered 40% also on a much larger lump sum. That's after a lifetime in the public sector. Can't go paying too much tax if he's to maintain the lifestyle of a new porsche every couple of years (yes, really, he's on his fourth in the six years I've known him).

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Why not just cap all salaries at £200k? After all, nobody really needs more to live in comfort ;)

The point I was making was that double taxation (which would quickly become triple, quadruple or quintuple taxation as soon as you buy anything...) is an unattractive concept - especially to the richest 5% who typically employ an accountant... ;)

Maybe some kind of sliding scale depending on existing pension pot size would be fairest. The system is is so complex already that a few extra layers of administration will barely be noticed ;)

...No salaries should not be capped.....

...we are all already double taxed...I put my savings into my savings account to put towards my pension it is taxed at source and I have already paid tax on it before I saved it and I will pay tax on it when I spend it....so it goes on....the wealthier pay tax sure but not the same percentage relative of earnings whatever way you look at it.

...the system is complex for sure and very unfair for many that do not understand what they are buying into....a total overhaul and revaluation of private pensions to make it clear and transparent, is long overdue....someone is making from it and it is not the ones that pay into it. ;)

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Worth bearing in mind, the Torygraph has done a lot of kite-flying of late. This smells of troll :huh:

Quite agree. This is a rascalish article especially this part

"Some Conservative MPs expect the axing of higher-rate relief to be merely the first stage in a more extensive and radical plan which would end up with all tax relief – including on contributions made by people paying the basic 20p rate of income tax – being abolished, saving £22 billion a year in total"

I've no doubt that some conservative MPs have all sorts of odd views, but that doesn't make them government policy. I suspect the journalist just made much of it up.

That said, the abolition of 40% tax relief on pensions contributions is both possible and politically palatable. I would go a step further and hope that some of the current OAP benefits go the same way as child benefit and are axed for higher rate tax payers.

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Everyone is missing the obvious one here... double taxation.

At the moment you get tax relief on your pension contributions, but when you take your pension you pay tax at the prevailing rate. Taxing pension contributions twice - when earned and when received will make pensions a very inefficient way of saving for retirement.. So if he taxes contributions, he would be very likely to abolish tax at the other end - especially if the government actually wants to encourage pension saving.

Far more likely is taxing contributions for people on higher tax rates when their pension pot has exceeded some pre-defined limit. This would nicely hit many of the over-remunerated corporate class, who often "hide" excess income in a pension, the only downside would be that it wouldn't be retrospectively applied to the likes of Fred the shred.

Quite a few people actually just QROPS the pension pot and move to enlightened overseas territories who do tax overseas income (and have Double

taxation treaty with the uk to exempt pension payment) and never pay much tax at all.

Also.. pension lump sum (25%) is tax free.

Better for the state to lower overall tax rates and stop making unsustainable promises about 'protecting' people's future...

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Far more likely is taxing contributions for people on higher tax rates when their pension pot has exceeded some pre-defined limit.

Already happens for ordinary people (I don't know about workarounds for special people like those with final salary/grandfather rights). Indeed, the "lifetime limit" has been reduced to £1.5million, which would leave you a long way short of, say, a judge's pension.

Final Salary pensions are multiplied by 20 to be tested against the £1.5m limit i.e. a pension of £10,000pa counts £0.2m towards the limit.

What annoys me is the phrase "paid out"

Discussions have begun at the Treasury over the move which would see the axing of tax relief currently paid out on pension contributions by people who pay income tax at the higher rates of 40 per cent and 50 per cent.

So the government doesn't steal 40% of my pension contributions, and that's "paying out"?!

This would be a big hit to pensions for higher rate taxpayers if this goes through.

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  • 311 Brexit, House prices and Summer 2020

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      • down 5% +
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