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We've had the "Big Society" (whatever that was), then "we were all in it together", now the current Prime Minister wants a fairer society. Laudable but how does that square with additional State aid being given to the richest. By this I mean tax relief on pension contributions. A basic rate taxpayer (BRT) gets relief at 20% and a higher rate taxpayer (BRT) obtains relief at 40% (45% for an additional rate taxpayer).
Thus, for a £100 investment a BRT contributes £80 and a HRT contributes £60. Another method of increasing the richest/poorest divide.
This is not confined to one political party. All are guilty. The Treasury say that there is no consensus for change (having asked only HRT). Turkeys at Xmas springs to mind.
They also say that "now is not the right time" for change. Again turkeys making the decisions.
I would suggest restricting ALL pension contribution tax relief to 20%, which still makes pensions a good investment and, at the same time, give the Chancellor ample funds to replace the National Insurance debacle and more.
Discuss.
Thus, for a £100 investment a BRT contributes £80 and a HRT contributes £60. Another method of increasing the richest/poorest divide.
This is not confined to one political party. All are guilty. The Treasury say that there is no consensus for change (having asked only HRT). Turkeys at Xmas springs to mind.
They also say that "now is not the right time" for change. Again turkeys making the decisions.
I would suggest restricting ALL pension contribution tax relief to 20%, which still makes pensions a good investment and, at the same time, give the Chancellor ample funds to replace the National Insurance debacle and more.
Discuss.
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I would not like to see tax relief on pensions reduced, the middle and working classes will suffer most
Only if they are HRT. Anyway why should they be treated differently?
Take the money off people and give it to the government will not bring about a successful economy,
tax less , much less
tax less , much less
I would not dispute that concept. However, let's reduce that rich/poor divide. The additional monies available to the Chancellor could be distributed to benefit us all.
yes Orpheus you may be right , there is a problem with the gap growing between the middle , working classes and the rest
similarly when a pay rise 3% on a small wage and large wage
The gap becomes greater.
similarly when a pay rise 3% on a small wage and large wage
The gap becomes greater.
You could've picked any number of better examples to make your point.
Tax relief is given at the rate at which tax is paid, which is surely only fair?
In fact the govt has been taking more and more steps to make it difficult for the wealthy to use pensions as a means of creating more wealth. The reduction of the annual allowance (once £255K) to £40K, the reduction of the lifetime allowance (once £1.8m) to £1m, being just a couple of restrictions - both highly unlikely to affect anyone that is a BRT.
The implementation of workplace pensions which force those greedy, wealthy employers to contribute to pensions for their staff is another initiative that could be seen to be the direct opposite of what you suggest.
Tax relief is given at the rate at which tax is paid, which is surely only fair?
In fact the govt has been taking more and more steps to make it difficult for the wealthy to use pensions as a means of creating more wealth. The reduction of the annual allowance (once £255K) to £40K, the reduction of the lifetime allowance (once £1.8m) to £1m, being just a couple of restrictions - both highly unlikely to affect anyone that is a BRT.
The implementation of workplace pensions which force those greedy, wealthy employers to contribute to pensions for their staff is another initiative that could be seen to be the direct opposite of what you suggest.
of course things have changed , I might like to know who this state aid is going to
there are thousands of people perhaps millions who I would not wish to get any state aid,
that's how it is now, what will you think of me ?
there are thousands of people perhaps millions who I would not wish to get any state aid,
that's how it is now, what will you think of me ?
Given that employers already pay more NI per employee than the employees themselves pay you could argue that they are already contributing to their state pensions.
the best policy in today's world is to make sure you can pay as little tax as possible,
because you can have no idea where it will end up , or even why.
because you can have no idea where it will end up , or even why.
Des O
The main thrust of my OP was fairness and I fail to see why one section of society should get more State aid than another merely because they earn more.
Yes, undoubtedly, there are many other examples which could have been picked.
It was mooted that the previous Chancellor was considering changes to the pension tax relief until he was "got at" by wealthy investors, as reported in the Daily Telegraph today.
What you say about recent changes is, of course, perfectly valid. I have no objection to the amount that HRT invest in their pensions as we can't all be high earners, but I do object to them getting a larger percentage slice of the tax relief cake.
I do not see why employers contributing to workplace pensions, which includes HRT, is the direct opposite of which I'm suggesting.
The main thrust of my OP was fairness and I fail to see why one section of society should get more State aid than another merely because they earn more.
Yes, undoubtedly, there are many other examples which could have been picked.
It was mooted that the previous Chancellor was considering changes to the pension tax relief until he was "got at" by wealthy investors, as reported in the Daily Telegraph today.
What you say about recent changes is, of course, perfectly valid. I have no objection to the amount that HRT invest in their pensions as we can't all be high earners, but I do object to them getting a larger percentage slice of the tax relief cake.
I do not see why employers contributing to workplace pensions, which includes HRT, is the direct opposite of which I'm suggesting.
lfc
The additional monies retained by thge Treasury could go to repairing schools and military establishment, foe example.
What I think of you? I thank you for contributing.
Knight C.
Yes, you could. However, I was refering to non=Stae pensions.
The additional monies retained by thge Treasury could go to repairing schools and military establishment, foe example.
What I think of you? I thank you for contributing.
Knight C.
Yes, you could. However, I was refering to non=Stae pensions.
thanks Orpheus, it doesn't take much to write such a pleasant reply such as yours...and yet I rarely do it. maybe I should change
Ifc,
No don't change, just keep posting with logical arguments.
No don't change, just keep posting with logical arguments.
ah, now that's surprised me
you're right, why should I be what I am not, and not be what I am.
that would be silly :)
you're right, why should I be what I am not, and not be what I am.
that would be silly :)
Agree with Orpheus - tax relief for pensions and charities should be equal across all incomes.
We should also equalise inheritance tax, corporation tax and stamp duty at the same correct level for all
We should also equalise inheritance tax, corporation tax and stamp duty at the same correct level for all
Bongo,
Thank you for your support.
Although I'm in favour of charitable giving I do not agree with the low pencentage of their income which actualy finds its way to their particular cause.
Thank you for your support.
Although I'm in favour of charitable giving I do not agree with the low pencentage of their income which actualy finds its way to their particular cause.
The main thrust of my OP was fairness and I fail to see why one section of society should get more State aid than another merely because they earn more.
A very strange point of view. This money is salary earned by an individual - it is NOT money the Government has ever had in its possession, and has never given it to anybody for anything. It is exemption from tax to invest in your pension pot as gross.
What you need to understand is that that money will become payable as a pension one day, which is taxed. The tax free pot will grow much faster than one taxed initially, due to compounding of the gains, and the larger inputs. That will create a bigger pension, which will create a bigger tax payment to the Government.
So the bottom line is that both the individual and the Government gain.
A very strange point of view. This money is salary earned by an individual - it is NOT money the Government has ever had in its possession, and has never given it to anybody for anything. It is exemption from tax to invest in your pension pot as gross.
What you need to understand is that that money will become payable as a pension one day, which is taxed. The tax free pot will grow much faster than one taxed initially, due to compounding of the gains, and the larger inputs. That will create a bigger pension, which will create a bigger tax payment to the Government.
So the bottom line is that both the individual and the Government gain.
Shab,
Ask a BRT whether he/she would like a £100 investment to cost them £60 instead of £80 or, to use your vernacular, would they like the same amount of tax exemption. I can imagine their reply.
Also, with the larger exemption the BRT could afford to invest more, say another £20, to grow the pension pot thus paying more tax on retirement.
I am not saying that a HRT shouldn't invest more than a BRT only that they should be on an equal footing.
Ask a BRT whether he/she would like a £100 investment to cost them £60 instead of £80 or, to use your vernacular, would they like the same amount of tax exemption. I can imagine their reply.
Also, with the larger exemption the BRT could afford to invest more, say another £20, to grow the pension pot thus paying more tax on retirement.
I am not saying that a HRT shouldn't invest more than a BRT only that they should be on an equal footing.
I see your point, but there are 2 flaws. Firstly, if a person with a very small wage/pension pot was to be given relief at 40%, then they would likely only be a 20% taxpayer on retirement, so the Government would lose out. Secondly, to give relief at 40% would cost the Government of today, for the benefit of pensioners tomorrow (when the incumbent Government will be all dead and buried, so there is nothing in it for them).
Add into that the cost of admin, which would be much, much higher than the present system, because giving people free money always attracts the chancers and fancy accountants.
An admirable suggestion, but not workable. Also the question of who's money it is initially is still there.
Add into that the cost of admin, which would be much, much higher than the present system, because giving people free money always attracts the chancers and fancy accountants.
An admirable suggestion, but not workable. Also the question of who's money it is initially is still there.
Shab,
When the idea was considered prior to the 2016 March Budget one of the proposals was an equalization of relief at 33%. Personally I thought that this was too high, but at least it would have been fairer and it does show a recognition of the need for a different system.
As you said earlier it is not giving people free money as it was not the Government's in the first place and I don't see how there would be an increased cost of admin. The system stays the same and requires only a minor tweak. Tax laws are frequently amended and as for the tax avoiders we all try to minimize our liabilities within the law.
As an aside I thought that there may have been more contributors. Either those who have read the OP are HRT or they are making so much money on here that they pay no taxes. Oh happy days.
When the idea was considered prior to the 2016 March Budget one of the proposals was an equalization of relief at 33%. Personally I thought that this was too high, but at least it would have been fairer and it does show a recognition of the need for a different system.
As you said earlier it is not giving people free money as it was not the Government's in the first place and I don't see how there would be an increased cost of admin. The system stays the same and requires only a minor tweak. Tax laws are frequently amended and as for the tax avoiders we all try to minimize our liabilities within the law.
As an aside I thought that there may have been more contributors. Either those who have read the OP are HRT or they are making so much money on here that they pay no taxes. Oh happy days.
When income crosses the £43k line ( roughly ) the level of income taxation reduces.
How can he say that, you might ask? Employees NI reduces from 12% to 2%, but PAYE increases from 20% to 40%, so an overall increase of 10% surely. No. Because people operating at the 43k level and above are smart cookies and can defer some or all of that PAYE jump by sticking it in a pension, and later in life collecting a quarter tax free at aged 55, some of it tax free anyway, and the rest at 20%.
People earning in the 11k to 43k range are stuck paying 12% employees NI and cannot game the tax system like this, and are unlikely to have much discretionary spending anyway.
As Adam Smith said in the Wealth of Nations: "It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion."
How can he say that, you might ask? Employees NI reduces from 12% to 2%, but PAYE increases from 20% to 40%, so an overall increase of 10% surely. No. Because people operating at the 43k level and above are smart cookies and can defer some or all of that PAYE jump by sticking it in a pension, and later in life collecting a quarter tax free at aged 55, some of it tax free anyway, and the rest at 20%.
People earning in the 11k to 43k range are stuck paying 12% employees NI and cannot game the tax system like this, and are unlikely to have much discretionary spending anyway.
As Adam Smith said in the Wealth of Nations: "It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion."
When the idea was considered prior to the 2016 March Budget one of the proposals was an equalization of relief at 33%.
But that has an obvious flaw. If you were 50, still working and earning under £43k, and had £100k in assets outside of a pension, you could put £20k a year into your pension. With a 33% relief, the Government would then give you relief on £20k at the rate which you pay Income Tax (meaning you would pay very little tax, if any) and then give you an ADDITIONAL 13% relief, worth £2600 relief = £520. That is 2.6% interest guaranteed, which is much better than the bank. You would be mad not to take this free money. Everybody would do it.
I can see both sides of this argument, but think the costs would be enormous. One solution would be to bar over 40s from the scheme. That would remove a lot of abuse opportunities and give the younger people a chance to get a half decent pension.
But that has an obvious flaw. If you were 50, still working and earning under £43k, and had £100k in assets outside of a pension, you could put £20k a year into your pension. With a 33% relief, the Government would then give you relief on £20k at the rate which you pay Income Tax (meaning you would pay very little tax, if any) and then give you an ADDITIONAL 13% relief, worth £2600 relief = £520. That is 2.6% interest guaranteed, which is much better than the bank. You would be mad not to take this free money. Everybody would do it.
I can see both sides of this argument, but think the costs would be enormous. One solution would be to bar over 40s from the scheme. That would remove a lot of abuse opportunities and give the younger people a chance to get a half decent pension.
Shab
The over 40 idea is a novel one but would probably be considered discriminatory. I still believe that relief should be limited to 20% or thereabouts for everyone which is still a decent return. Also, more needs to be done to educate people on finance and money management, particularly those who think that paying back £10pw to a payday loan company is good value. Maybe start the education at school.
Regarding costs, at 20% the Treasury would retain more than at present thus there would be no additional costs. Generally I am not in favour of the Government keeping any more of the nation's hard earned but that is the system and I can't see any better method.
The over 40 idea is a novel one but would probably be considered discriminatory. I still believe that relief should be limited to 20% or thereabouts for everyone which is still a decent return. Also, more needs to be done to educate people on finance and money management, particularly those who think that paying back £10pw to a payday loan company is good value. Maybe start the education at school.
Regarding costs, at 20% the Treasury would retain more than at present thus there would be no additional costs. Generally I am not in favour of the Government keeping any more of the nation's hard earned but that is the system and I can't see any better method.
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