Jump to content
House Price Crash Forum
Sign in to follow this  
Si1

Govt Pensions Consultation Due September

Recommended Posts

Scares me.

If they change the system to paying tax upfront then it's just another subsidy for current beneficiaries, retiring boomers, and a big opportunity to take a disproportionate chunk out of existing retirement pots.

Share this post


Link to post
Share on other sites

Scares me.

If they change the system to paying tax upfront then it's just another subsidy for current beneficiaries, retiring boomers, and a big opportunity to take a disproportionate chunk out of existing retirement pots.

So I take it you're not one of those HPCers who dislikes today's pensions and doesn't want to put money in one?

There seem to be quite a few of them around: from HPC tin-hatters to "property is my pension" types. Perhaps a pensions review can address their concerns? They've already made one big move in that direction with the ISA changes making ISAs a realistic way to save for an ample pension.

Share this post


Link to post
Share on other sites

So I take it you're not one of those HPCers who dislikes today's pensions and doesn't want to put money in one?

There seem to be quite a few of them around: from HPC tin-hatters to "property is my pension" types. Perhaps a pensions review can address their concerns? They've already made one big move in that direction with the ISA changes making ISAs a realistic way to save for an ample pension.

Isn't their main concern that govt could extract money from your pension pot and its rather hard to withdraw it to avoid this, whereas an isa is more liquid, can be withdrawn at very little notice?

The advantage of a pension pot is that it doesn't disqualify you from social security support in the case of unemployment etc. So far.

Share this post


Link to post
Share on other sites

Pension planning is now a complete nightmare as the Government simply can not leave the system alone.

This is the umpteenth consultation or green paper on the topic.

Moreover as experience shows the tax relief the Chancellor gives today can be withdrawn tomorrow so there is no guarantee that any proposal to switch the tax relief to payments made at retirement will be honoured when it comes to time to collect the pension

It is par for the course for Osborne who is an aggressive tax raising Chancellor as the BTL brigade have

found out

Indeed a cursory glance at the budget figures for tax yield he is harvesting compared with his Labour predecessors is revealing

Camerons government have increased taxes far in excess of any changes in inflation or GDP growth

National Account Taxes yielded £490 billion in Labours last year of office, By contrast the tax yield was over £ 600 billion in 2015

One thing this government has not done is cut taxes

No doubt this is in part a response to the unholy mess that Brown left his successors but it is a bit surprising that Labour did not make a point of highlighting the fact in the 2015 General Election.

Anyway however the 'reforms are wrapped up you can guarantee Osborne will be wanting to to front load the yield so he can benefity from it politically

Not sure how the proposals will benefit current retirees as their pensions are doubtless going to stay liable to income tax as earnings under Schedule E as they are now and Brown removed the tax relief on dividends that pension schemes enjoyed years ago.

Edited by stormymonday_2011

Share this post


Link to post
Share on other sites

So I take it you're not one of those HPCers who dislikes today's pensions and doesn't want to put money in one?

There seem to be quite a few of them around: from HPC tin-hatters to "property is my pension" types. Perhaps a pensions review can address their concerns? They've already made one big move in that direction with the ISA changes making ISAs a realistic way to save for an ample pension.

I'm one of those people. It's not a dislike; the problems are manufactured and pensions are fundable if as a society that's where we choose to prioritise. It's for reasons such as recent reforms and the proposals sugested in this review that could make standard pension saving pointless (why tie up funds when frontloaded tax means you don't have to) or extra risky (what stops a later government also taxing again on withdrawal).

Share this post


Link to post
Share on other sites

Seems to me they want to encourage the use of ISAs instead of pensions for personal retirement saving and to keep people working.This is perfect for the government.With a tax free allowance of £12500 in five years people can save hard with tax relief,then retire,taking up to £12500 a year tax free.Add in some ISAs etc job done for most average people.Take away tax relief on the way in,tax free on the way out and the personal allowance is then not being used on the way out.Unless you keep working lower income people lose out a huge amount because they arent getting to use their personal allowance if they retire.

This would really hit the lower/average paid, but will be sold as attacking the rich.

Share this post


Link to post
Share on other sites

Seems to me they want to encourage the use of ISAs instead of pensions for personal retirement saving and to keep people working.This is perfect for the government.With a tax free allowance of £12500 in five years people can save hard with tax relief,then retire,taking up to £12500 a year tax free.Add in some ISAs etc job done for most average people.Take away tax relief on the way in,tax free on the way out and the personal allowance is then not being used on the way out.Unless you keep working lower income people lose out a huge amount because they arent getting to use their personal allowance if they retire.

This would really hit the lower/average paid, but will be sold as attacking the rich.

The tax first issue is said to help the poor by being more transparent, apparently.

Share this post


Link to post
Share on other sites

Seems to me they want to encourage the use of ISAs instead of pensions for personal retirement saving and to keep people working.This is perfect for the government.With a tax free allowance of £12500 in five years people can save hard with tax relief,then retire,taking up to £12500 a year tax free.Add in some ISAs etc job done for most average people.Take away tax relief on the way in,tax free on the way out and the personal allowance is then not being used on the way out.Unless you keep working lower income people lose out a huge amount because they arent getting to use their personal allowance if they retire.

This would really hit the lower/average paid, but will be sold as attacking the rich.

Sorry, doesn't work like that. You're just describing a savings account, and withdrawing money from that is already tax-free.

It will hit high earners, because it stops people spreading the tax burden through life. As in, saving tax at 40% when on a higher income and paying at 20% (or 0% in these days of high tax-free allowances) on a lower one. But then, the often-silly complexity governments of both colours have introduced since 2008 already does a lot of that.

Share this post


Link to post
Share on other sites

The end result will probably be taxed on the way in, accumulate tax free whilst still in the pot and then normal tax allowances apply on the way out.

Oh and if you are unemployed or sick....you call on your own savings first instead of other people's.

That seems to be consistent with the hints we've had.

But I wonder if this might result in a protected way to save under ISA-like tax rules? A pot that can enjoy the same privileges as an owner-occupied house? We can lobby for it!

Share this post


Link to post
Share on other sites

I have no doubt the Treasury are looking to increase their yield as more tax relief is being granted at the higher rate on contributions into Pension funds (particularly as Osborne has caught more taxpayers in the 40% band by dropping the starting threshold) than is paid in tax on the way out since most pension income is not taxed at anything higher than the basic rate.

https://www.gov.uk/government/consultations/strengthening-the-incentive-to-save-a-consultation-on-pensions-tax-relief

Edited by stormymonday_2011

Share this post


Link to post
Share on other sites

Pensions are utterly simple and fair at the moment. They shouldn't touch them.

I really hope they don't change the system to no relief in, tax free out. That would just make it a age limit crippled ISA - with the benefit of it being IHT exempt though.

If they do want to make a tweak, selfishly the mooted 30% relief for all - i.e. removal of the higher rate - works for me as a lower rate payer (by choice). Nice little payrise

Share this post


Link to post
Share on other sites

Worth reading Steve Webb's comments on Osbornes intentions in the Telegraph

http://www.telegraph.co.uk/finance/personalfinance/pensions/11760564/The-biggest-pensions-shake-up-in-a-century-how-will-it-affect-you.html

The bit about Osborne trying to claw back tax relief already granted to pension savers ought to worry anyone who has been paying into a Pension scheme for decades but has not yet retired.That would be on a par with Browns raid on Pension funds but a lot more visible to savers. It seems an insanely risky strategy politically as it is a certain vote loser for the Tories so I can't see Osborne adopting it if he wants to be PM.

You have to laugh at the Treasury documents title "Strengthening the Incentive to Save" when it is nothing of the sort it is just the Exchequer looking for ways to restrict tax reliefs on Pensions. I bet they had a giggle thinking up that description.Of course, one of the reasons the cost shot up was Osborne trapping so many modest earners in the 40% band.

As always the problem with Pensions is that they take decades to build up but politicians work on much shorter time scales.

Edited by stormymonday_2011

Share this post


Link to post
Share on other sites

Pensions are utterly simple and fair at the moment. They shouldn't touch them.

I really hope they don't change the system to no relief in, tax free out. That would just make it a age limit crippled ISA - with the benefit of it being IHT exempt though.

+1

Share this post


Link to post
Share on other sites

The consultation will just be to give the illusion that we are being listened to. I doubt they'll even take the time to read any submissions. This is all about bringing tax revenues forward as well grabbing a bit more tax over the life of the total pension (accrual + drawdown).

As a higher rate taxpayer I'm just glad I'm nearing the end of the pension accrual phase as that looks ripe for being hit. Now I just have to figure out how to keep what I've saved.

Share this post


Link to post
Share on other sites

What's not fair about the current system? From my perspective I have possibly one thing but would like to hear your ideas first.

Maybe we should ask the 50 million people who don't get higher rate tax relief on pension contributions? For all the consternation on housing benefits or tax credits, pension relief costs more than either.

But the point was that Frugal Git should declare his interest. IIRC he claims to put most of his income into a pension.

Share this post


Link to post
Share on other sites

The consultation will just be to give the illusion that we are being listened to. I doubt they'll even take the time to read any submissions. This is all about bringing tax revenues forward as well grabbing a bit more tax over the life of the total pension (accrual + drawdown).

As a higher rate taxpayer I'm just glad I'm nearing the end of the pension accrual phase as that looks ripe for being hit. Now I just have to figure out how to keep what I've saved.

Not sure it is quite that simple a shoe in for Osborne

The pensions Minister Ross Altmann is none too keen on the Treasury's latest wheeze for grabbing the punters money and I doubt the Pensions industry are that keen either given the hassle and cost Osbornes last announcement caused them

http://www.fundweb.co.uk/news-and-analysis/ros-altmann-hits-out-at-pensions-as-isas-plans/2022580.article

And needless to say the likes of Boris johnson who have eyes on Camerons job as PM in the long term would not be too unhappy for Osborne to fall on his ar*e over this issue

Edited by stormymonday_2011

Share this post


Link to post
Share on other sites

Maybe we should ask the 50 million people who don't get higher rate tax relief on pension contributions? ...

Full disclosure before I reply: I'm a higher rate taxpayer and currently sacrifice large amounts into my pension so may be seen as biased.

The current system, with the way tax is relieved, is nothing more than a tax deferral system. The government gives you absolutely nothing (neither 20% or 40%) as it's all your money being put into the pension. As a 20% tax payer I save £1 from my gross earnings and then am taxed on that £1 when I someday take my pension. The 40% tax payer is treated exactly the same way, £1 in and taxed on £1 out. How is that unfair?

The bit I actually think is unfair is the 25% tax free lump sum as I can't see any reason for that to exist other maybe as an incentive to lock your money up for such a long period.

Share this post


Link to post
Share on other sites

Maybe we should ask the 50 million people who don't get higher rate tax relief on pension contributions? For all the consternation on housing benefits or tax credits, pension relief costs more than either.

But the point was that Frugal Git should declare his interest. IIRC he claims to put most of his income into a pension.

The treasury document calculates the net cost of pension relief at about £22 billion per annum (after the tax on pensions at payment has been deducted) but I think that also includes reliefs on employers as well as employees contributions to the schemes

The ideas being floated are not just to restrict the tax relief , as that is already being done but to remove it entirely, and to then also possibly carry out some restrospective grab on the relief that was granted in the past to savers (though how you would calculate the value of that over decades of different tax rates is beyond me). All to be replaced with a promise of jam tomorrow from Mr Osborne.

Share this post


Link to post
Share on other sites

The treasury document calculates the net cost of pension relief at about £22 billion per annum (after the tax on pensions at payment has been deducted) but I think that also includes reliefs on employers as well as employees contributions to the schemes

The ideas being floated are not just to restrict the tax relief , as that is already being done but to remove it entirely, and to then also possibly carry out some restrospective grab on the relief that was granted in the past to savers (though how you would calculate the value of that over decades of different tax rates is beyond me). All to be replaced with a promise of jam tomorrow from Mr Osborne.

I was working on a figure of over £30bn which has long been bandied about for the relief rather than the net. Edited by 25 year mortgage 8itch

Share this post


Link to post
Share on other sites

I was working on a figure of over £30bn which has long been bandied about for the relief rather than the net.

Yes but the net amount is what Osborne would recover if relief was given at the time of payment out rather than payment in.

Osborne is a tax grabbing Chancellor which ultimately I suspect is going to be his undoing politically as he will upset just too many Conservative voters

Edited by stormymonday_2011

Share this post


Link to post
Share on other sites

Maybe we should ask the 50 million people who don't get higher rate tax relief on pension contributions? For all the consternation on housing benefits or tax credits, pension relief costs more than either.

But the point was that Frugal Git should declare his interest. IIRC he claims to put most of his income into a pension.

I wasn't hiding that. And remember, I'm a lower rate payer so my relief is 20%.

I'm not 'benefiting' massively. Anyone can do what I'm doing. They just have to structure their life differently, admittedly some may need the income now - but those are 99% of the time circumstances of their own making. The rest who genuinely could do it, if they haven't got the guts to do it thats not my problem. All I'm looking to do is maximise tax efficiency as someone who is an average earner.

I maintain that the current system is fair. I don't want 40% relief, because i don't pay 40% tax. But if george wants to give us all 30%, I'll keep my mouth shut and take it!

Edited by Frugal Git

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • Next General Election   95 members have voted

    1. 1. When do you predict the next general election will be held?


      • 2019
      • 2020
      • 2021
      • 2022

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.