Chancellor may tax older taxpayers more than younger.

[Destination]

You do understand they tax people upon their pension, yes?
It isn't a tax free option.

So at a lifetime allowance of 500k, it would mean I'd be well over that just with my NHS contributions alone, prior to any private pension contribution.
Worryingly so, getting double taxed, before and after retirement on trying to provide form myself in retirement so the government doesn't have to.

That a very low limit.

 

[muon]

You do understand they tax people upon their pension, yes?
It isn't a tax free option.

So at a lifetime allowance of 500k, it would mean I'd be well over that just with my NHS contributions alone, prior to any private pension contribution.
Worryingly so, getting double taxed, before and after retirement on trying to provide form myself in retirement so the government doesn't have to.

That a very low limit.

I think it is fair. Everyone is treated equally going forward and you don't need any age based taxation. It is also a very progressive tax.

I never said it wouldn't increase the tax burden on some going forward. The same argument applies at £1m. Pensions are very tax efficient at the moment, efficient = lower tax burden.

Ask the majority of people if they think a £500k pension equivalent is very low. I'd say most pensions are below this, and so it is a very progressive limit.

Also you keep saying so the government doesn't need to. Are you not going to claim the state pension?

 

[Destination]

I think it is fair. Everyone is treated equally going forward and you don't need any age based taxation. It is also a very progressive tax.
I never said it wouldn't increase the tax burden on some going forward. The same argument applies at £1m. Pensions are very tax efficient at the moment, efficient = lower tax burden.
Ask the majority of people if they think a £500k pension equivalent is very low. I'd say most pensions are below this, and so it is a very progressive limit.
Also you keep saying so the government doesn't need to. Are you not going to claim the state pension?

Given how dramatically things have changed over the past 10 years, I could easily see the state pension become income linked, income based, or income tested at some point.

Currently I pay a fair bit or more a year in NHS pension contributions. With a limit of 500K imposed, I will stop paying this when i hit the limit as there would be better ways to invest my monies.
So the glorious government with their progressive tax will end up having to pay me more, and find more cash.
A new NHS worker, expected to work until 68 from an age of 18-23 depending who they are and how long they spent in education, will do 45-50 years.
The 2015 scheme works on 1/54ths as average salary, so uprated at the factor of 20, as no lump applies gives us 500K contributions arriving in 1/3rd of this time on a consultant salary.
They're not going to keep blapping into a scheme in that time, so you've to find their uprated amounts also.

Also I haven't said at any point that 'the government doesn't need to' , nor have I said it repeatedly.
The government will do whatever the **** they want. They've shown this in the past.
What I have said is everything they have done has to been to the detriment of the young and middle aged workers, not those who have already retired on embellished schemes and schemes that never paid for themselves.
Granted members of such schemes will say they were paid lower actual pay as the pension they are currently receiving is and was intended to compensate for this.

 

[rawuk]

Ask the majority of people if they think a £500k pension equivalent is very low. I'd say most pensions are below this, and so it is a very progressive limit.

Also you keep saying so the government doesn't need to. Are you not going to claim the state pension?

Wow-weeee.

The state pension was setup to provide a safety net for those that reach an age when they were likely not going to be able to work anymore and bring them out of poverty/benefits. Originally it sat at 65 for men when the average age of death was ~63.

It has wildly bloated in cost over the years as no politicians wanted to change it as it is a hot potato. Thankfully it is now being modified and will hopefully rise as long as the life expectancy increases as it was always meant to. I say this as mid-20s man who will likely not see a state pension until I'm 75.

£500,000 is not a lot of money over a full lifetime. Especially if you follow basic financial advice. As a society we want people to invest more money into pensions rather than property as having an older generation holding onto property as a means of funding their retirement pushes the market prices up even higher and causes half the problems we currently face.

Liquid assets e.g. pensions are better for society as a whole.

Regarding people with £1,000,000 sized pensions taking the state pension as well? Why shouldn't they? They've paid into the system, likely far far more, than the average man that takes it. FYI. An average annuity will pay 4-5%. So the state pension at £8,300 is roughly £210,000.

Final Salary pensions were destroyed due to pension freedoms given by Margaret Thatcher. Too many youngsters, who effectively paid the way for older members, didn't join. Thereby increasing the cost of the schemes to such extents they closed to new membership. Government final salary schemes are not funded but paid from other taxation.

 

[muon]

I have no problem people taking the state pension under current rules. The poster was saying multiple times they were saving for a pension to save the government money.

I don;t think you have followed the conversation very well with the other stuff you are saying.

You have picked up on one comment (incorrectly) and gone off on a tangent.

£500,000 is a large pension pot. A significant of people will have a ~£0 pension pot (because they have been earning minimum wage all their life etc.). There is a strong argument to be made about removing the tax efficiency of large pension pots.

 

[rawuk]

I have no problem people taking the state pension under current rules. The poster was saying multiple times they were saving for a pension to save the government money.

I don;t think you have followed the conversation very well with the other stuff you are saying.

You have picked up on one comment (incorrectly) and gone off on a tangent.

10pages in it happens. The tangent is due to you being completely wrong bud. Your "progressive number" is not progressive and shows a deeply flawed understanding of our nations pension system just as much as the gentlemen you quote.

 

[muon]

10pages in it happens. The tangent is due to you being completely wrong bud. Your "progressive number" is not progressive and shows a deeply flawed understanding of our nations pension system just as much as the gentlemen you quote.

£500k pension pot isn't amongst the highest? I think you aren't aware of the reality of wealth distribution in the UK.

A higher rate tax payer sacrificing at a marginal rate of 42% to then pay 20% in retirement is a massive tax break.

Lower earners can't get that tax break.

That tax break exists to encourage people to plan ahead, but that benefit needs to be capped at a reasonable level. £500k pot is about a £25k annuity or final salary pension. That seems about right as about the median salary. They will also get an £8k state pension.

 

[muon]

Alternatively just cap pensions tax relief at 20%. However I suspect many better off higher rate tax payers will be annnoyed they can't benefit in their unique position that the majority of earners in the UK aren't in.

 

[Destination]

£500k pension pot isn't amongst the highest? I think you aren't aware of the reality of wealth distribution in the UK.
That tax break exists to encourage people to plan ahead, but that benefit needs to be capped at a reasonable level. £500k pot is about a £25k annuity or final salary pension. That seems about right as about the median salary. They will also get an £8k state pension.

Real terms, 50 years time, for someone starting now and building that lifetime pot, how much do you think that 25K is actually going to be worth?
Even in my case, in 20 years time.

 

[muon]

Real terms, 50 years time, for someone starting now and building that lifetime pot, how much do you think that 25K is actually going to be worth?
Even in my case, in 20 years time.

The very first post I made said the £500k allowance would be index linked. So real terms exactly what it is worth today.

 

[Randomface74]

Alternatively just cap pensions tax relief at 20%. However I suspect many better off higher rate tax payers will be annnoyed they can't benefit in their unique position that the majority of earners in the UK aren't in.

The unique position of having people sponging off you?

 

[Mason-]

Good, **** the baby boomers. Tax them to Hell and back, the fat lazy slobs. "why don't you just work harder!!" shut the **** up you decrepit old idiot who bought a house with his post-war unskilled labour job then thinks the younger generation can't do the same because they're "entitled and lazy"

I'm not mad

Haha I do think that's a bit strong. But I do agree that the people who say "why don't you just work harder" are morons. There have been lazy and productive people in every generation. I don't think laziness in our generation is more prolific than in others although that's me speculating.

 

[rawuk]

Muon you keep editing your posts after I've quoted them! Had to start replying all over again. Haha.

Alternatively just cap pensions tax relief at 20%. However I suspect many better off higher rate tax payers will be annnoyed they can't benefit in their unique position that the majority of earners in the UK aren't in.

That isn't a fair system and totally ignores the nuances of the pension arena.

I strongly urge you to read into how the allowances interact and how the landscape of pensions has changed since the 2014 budget alongside having a detailed look into how compound growth and inflation inter-react.

 

[muon]

Muon you keep editing your posts after I've quoted them! Had to start replying all over again. Haha.


That isn't a fair system and totally ignores the nuances of the pension arena.

I strongly urge you to read into how the allowances interact and how the landscape of pensions has changed since the 2014 budget alongside having a detailed look into how compound growth and inflation inter-react.

It's complicated with nuances? Minor nuances don't detract from how pensions work. It is not difficult.

You can put money into a pension up to £40k (or your salary) every year with tax relief at your marginal rate of tax. There is a lifetime annual allowance of £1m which hasn't risen since being introduced in 2016.

Someone earning a higher rate of tax gets pensions tax relief at 40%. They are people likely to have pensions which run into to the £500k (in today's money) region.

Someone earning the minimum wage say £20k per year likely won't be able to afford a pension contribution other than a few percent. Their pots will be <£100k.

Someone earning £40k a year will get pensions tax relief at 20%. Their pots will likely not hit £500k in today's money unless they are putting a very large proportion away. I earn above this and put 20% away and with 7% growth will not hit £500k in today's money. I benefit from higher rate pensions tax relief and appreciate it is unfair on others.

These people will all likely have total pensions (including state pension) below the higher rate tax threshold and all pay a marginal rate of tax of 20% in retirement.

So pensions tax relief has been neutral for everyone except for the higher rate tax payers. These people are more likely to be later on in their careers as well.

These arguments are the exact same ones which resulted in mortgage interest tax relief being capped at 20%. Tax relief needs to be flat and not at a marginal rate. Alternatively the total amount of tax relief available (lifetime allowance) needs to be capped, and is at £1m.

 

[Randomface74]

Income tax needs to be flat.

 

[rawuk]

These arguments are the exact same ones which resulted in mortgage interest tax relief being capped at 20%.

That is not why that policy was implemented I'm afraid. The mortgage relief for higher rates was removed to make investing via properties, with gearing (mortgages), far less attractive as it was having a horrific effect on the lower end of the market.

Tax relief needs to be flat and not at a marginal rate. Alternatively the total amount of tax relief available (lifetime allowance) needs to be capped, and is at £1m.

If relief is based upon a flat rate than tax should be at a flat rate. You shouldn't have it both ways.

I'm not going to discuss it in more detail as you clearly have a political and/or ideological belief rather than wanting a fair system as you wish to build it around those earning below £50,000. So the current nuances would be irrelevant to your belief.

 

[muon]

What is fair is all about how you weigh equity and that is always going to be political. It's funny you think fairness is black and white. I suspect your view is what you determine to be fair.

Extra tax relief for higher rate earners is not an absurd thing to object against. It is very much one of the reasons mortgage interest tax relief was capped at 20% rather than removing the relief completely. After all doing that would reduce the BTL market even further.

As for relief having to always be at the marginal rate, why do you have that as an embedded view? What makes that right? Tax rates can be different to the rates of relief. In fact many things are already designed that way.

 

[SpeedFreak]

Tax relief needs to be flat and not at a marginal rate. Alternatively the total amount of tax relief available (lifetime allowance) needs to be capped, and is at £1m.

This only makes sense in a world where tax is applied at a flat rate and not progressively like we currently have in the UK. Otherwise what is fair is quite frankly just a case of interpretation. Often (granted not always), fair is a term used to justify taking more from those who studied, worked hard and planned ahead to subsidise others who were unwilling to or lack the discipline to do so.

 

[Randomface74]

I wish we'd stop using the word 'progressive' for the most progress-punishing policies.

 

[The_Abyss]

You can put money into a pension up to £40k (or your salary) every year with tax relief at your marginal rate of tax. There is a lifetime annual allowance of £1m which hasn't risen since being introduced in 2016.

It has. It rises by CPI, and will be £1.03m from April 2018.

Someone earning a higher rate of tax gets pensions tax relief at 40%.

No, they don't. They get tax relief at their marginal rate. So, someone earning £50,000 will get part of their tax relief at 40% and part at 20%.

These arguments are the exact same ones which resulted in mortgage interest tax relief being capped at 20%. Tax relief needs to be flat and not at a marginal rate. Alternatively the total amount of tax relief available (lifetime allowance) needs to be capped, and is at £1m.

As already covered, the Lifetime Allowance isn't capped, and nor should it be restricted too. The Lifetime Allowance doesn't cap available tax relief - that the annual allowance. Pensions already have input restrictions via the annual allowance, just like ISAs. ISAs do not have a capped upper limit, a limit which is more impacted by investment growth more than anything else, but pensions do. The lifetime allowance for pensions should be scrapped completely - there's absolutely no justification for it.

Tax relief, by its very nature, is relief from tax. In the case of pensions it is relief from income tax. Make both a flat rate, and I can see the argument, otherwise no. There's already huge distrust in the political tampering of pensions - just look at the huge withdrawals from pensions since pension freedoms were first announced in 2015.