Rachel Reeves to announce £20 billion cuts today

[Nano]

The main reason 40% payers pay into a pension is not to save, it's to doge tax. They can save anywhere, but chose the way which doges tax the best.

Massive generalisation and mostly incorrect. Most employers contribute towards your pension if you put money into a pension. If you take it as income you don't receive that. Even if there was no tax difference it makes sense to take extra money for free from your employer. Also, all defined benefit pensions have no choice. They either contribute the amount they have to contribute (typically a very large percentage for a high earner) or they are not in the pension scheme. There is no halfway version.

What you probably mean is anyone contributing voluntary, additional amounts above the level that their employer matches or is required by their DB scheme is making a tax efficient savings choice then you would be correct but I would guess that is a much smaller proportion of people that do that.

 

[Andy_W]

Massive generalisation and mostly incorrect. Most employers contribute towards your pension if you put money into a pension. If you take it as income you don't receive that. Even if there was no tax difference it makes sense to take extra money for free from your employer. Also, all defined benefit pensions have no choice. They either contribute the amount they have to contribute (typically a very large percentage for a high earner) or they are not in the pension scheme. There is no halfway version.

What you probably mean is anyone contributing voluntary, additional amounts above the level that their employer matches or is required by their DB scheme is making a tax efficient savings choice then you would be correct but I would guess that is a much smaller proportion of people that do that.

Yeah, I was talking about additional contributions only.

I know everyone has to pay into a workplace pension unless they opt out, I manage one for our company, and I know the number in this will dwarf those paying additional contributions.

But yeah if it's getting matched then even better, but companies only have to put in 3% though, and the employee 5%, I think. I wasn't talking about DB, I don't get involved in that and our staff aren't on that.

People can also divert cash into a private pension not anything to do with the company pension, things like SIPP's etc. Obviously the more people earn, the more likely they're going to have money to save, and hence do as much as they can to do that in the most efficient way, if they're clued up. Those who are loaded are likely paying someone to sort it out, as they can afford it, this is when it gets even more efficient/ better future planning etc.

So what I was more getting as was when people are chucking 1-2k a month into their pension though, the employer isn't matching that, and it's being done to dodge tax/ be tax efficient, pretty much every single higher rate payer I know is doing this. They're doing this as FA's are telling them it's a good way to avoid tax, as it is, for most who can wait till 60 to get it back.

 

[Nano]

Yeah, I was talking about additional contributions only.

I know everyone has to pay into a workplace pension unless they opt out, I manage one for our company, and I know the number in this will dwarf those paying additional contributions.

But yeah if it's getting matched then even better, but companies only have to put in 3% though, and the employee 5%, I think. I wasn't talking about DB, I don't get involved in that and our staff aren't on that.

People can also divert cash into a private pension not anything to do with the company pension, things like SIPP's etc. Obviously the more people earn, the more likely they're going to have money to save, and hence do as much as they can to do that in the most efficient way, if they're clued up. Those who are loaded are likely paying someone to sort it out, as they can afford it, this is when it gets even more efficient/ better future planning etc.

So what I was more getting as was when people are chucking 1-2k a month into their pension though, the employer isn't matching that, and it's being done to dodge tax/ be tax efficient, pretty much every single higher rate payer I know is doing this. They're doing this as FA's are telling them it's a good way to avoid tax, as it is, for most who can wait till 60 to get it back.

That's purely anecdotal though. The majority of higher rate tax payers that I know are not doing that. They are doctors or other NHS workers so don't have the option. Changing the 40% relief will affect them massively. Anyone in the NHS on over £63k will be paying 12.5% of their salary as pension contributions. Changing the tax relief will cost them more for the same pension and they won't have a choice to do anything about it.

Anecdotes are rubbish though because neither yours or my anecdotes are fully representative but you can't make sweeping changes on anecdotal evidence. The impact of NHS pensions for example has to be taken into account when making changes to tax rules or you'd have to treat public sector DB pensions differently which probably isn't fair.

 

[Andy_W]

That's purely anecdotal though. The majority of higher rate tax payers that I know are not doing that. They are doctors or other NHS workers so don't have the option. Changing the 40% relief will affect them massively. Anyone in the NHS on over £63k will be paying 12.5% of their salary as pension contributions. Changing the tax relief will cost them more for the same pension and they won't have a choice to do anything about it.

Anecdotes are rubbish though because neither yours or my anecdotes are fully representative but you can't make sweeping changes on anecdotal evidence. The impact of NHS pensions for example has to be taken into account when making changes to tax rules or you'd have to treat public sector DB pensions differently which probably isn't fair.

Yeah, like I say I'm not talking about those in the NHS, I'm talking more like construction workers and the like, engineers, people who work offshore etc. But lets not pretend that the pension system for the NHS is not favourable, over most other pensions, as it is. There is probably little reason for them to be needing to bump that up, with what the NHS is bumping it up with.

Doctors and Nurses need a bump in pay, their pension is good, and they're getting a bump in pay thankfully, hopefully it's enough, they certainly deserve it.

 

[Nano]

Yeah, like I say I'm not talking about those in the NHS, I'm talking more like construction workers and the like, engineers, people who work offshore etc. But lets not pretend that the pension system for the NHS is not favourable, over most other pensions, as it is. There is probably little reason for them to be needing to bump that up, with what the NHS is bumping it up with.

Doctors and Nurses need a bump in pay, their pension is good, and they're getting a bump in pay thankfully, hopefully it's enough, they certainly deserve it.

You're missing the point. If you reduce the 40% tax relief then you are significantly increasing the costs which are unavoidable for all NHS staff. The NHS pension has been made worse multiple times in recent years so to keep it as it is for DB schemes would either require reduced contributions or a different tax arrangement specifically for them or you will almost certainly see further strikes.

 

[Redwurzel]

I am sure a significant amount of the revenue raised from not giving 40% tax payers their income tax back will go to the NHS as additional funding - the NHS would be a big overall beneficiary, surely anyone who uses the NHS wants that?

 

[HolgateCorner]

You're missing the point. If you reduce the 40% tax relief then you are significantly increasing the costs which are unavoidable for all NHS staff. The NHS pension has been made worse multiple times in recent years so to keep it as it is for DB schemes would either require reduced contributions or a different tax arrangement specifically for them or you will almost certainly see further strikes.

We have become a bit of a ‘tax avoidance’ culture in the last few years at the higher end.

Doctors retiring early to avoid paying more pension tax etc.

The Tories will see that as a big success even though it leaves us short of experienced Doctors but possibly helped the politics of them fighting the much lower paid and arguably far more important junior Doctors.

The vast majority of people in this country will never have to worry about 40% tax relief because they will not earn anywhere near enough for it to matter.

Labour needs to improve the lot of the lower paid as a priority.

 

[Nano]

We have become a bit of a ‘tax avoidance’ culture in the last few years at the higher end.

Doctors retiring early to avoid paying more pension tax etc.

The Tories will see that as a big success even though it leaves us short of experienced Doctors but possibly helped the politics of them fighting the much lower paid and arguably far more important junior Doctors.

The vast majority of people in this country will never have to worry about 40% tax relief because they will not earn anywhere near enough for it to matter.

Labour needs to improve the lot of the lower paid as a priority.

They will. With tax thresholds being frozen for at least another 4 years it won't be long until barely above average wage is a 40% tax payer.

Doctors aren't retiring early to avoid paying tax. The NHS pension was causing them to receive tax penalties because of how defined benefit pensions are valued putting them above the lifetime allowance. It meant it was costing them money to do extra shifts instead of them getting paid.

Doctors are highly educated people though and they are essential workers so losing them because we aren't making it worthwhile them working should be avoided. Being a doctor is not a vocation enough that they want to work for free and I think it's a bit foolish expecting them to work for less than they are worth.

 

[HolgateCorner]

They will. With tax thresholds being frozen for at least another 4 years it won't be long until barely above average wage is a 40% tax payer.

Doctors aren't retiring early to avoid paying tax. The NHS pension was causing them to receive tax penalties because of how defined benefit pensions are valued putting them above the lifetime allowance. It meant it was costing them money to do extra shifts instead of them getting paid.

Doctors are highly educated people though and they are essential workers so losing them because we aren't making it worthwhile them working should be avoided. Being a doctor is not a vocation enough that they want to work for free and I think it's a bit foolish expecting them to work for less than they are worth.

System or not the Doctors were putting tax avoidance at the front of their thinking and actions.

The NHS and its remuneration needs major surgery, the Tories have left a complete mess.

And I have a Doctor amongst my children so I post with some first hand knowledge of what is going on there.

 

[Andy_W]

You're missing the point. If you reduce the 40% tax relief then you are significantly increasing the costs which are unavoidable for all NHS staff. The NHS pension has been made worse multiple times in recent years so to keep it as it is for DB schemes would either require reduced contributions or a different tax arrangement specifically for them or you will almost certainly see further strikes.

You're arguing about a point I wasn't arguing about, but anyway...

The point I'm saying in your NHS case is up their pay, so they would have been no worse off (or even much better), pay wise, compared to how they've been raped by the Tories for 14 years. I.e if they were paid properly (for their worth, in line with the private sector or other options) then there would have been no initial strikes in the first place etc. i.e the starting point would be to undo what caused those initial strikes.

Sure, some of them might strike if the 40% payers got less relief, but they would be in the same boat as the rest of everyone else, it's still no more tax, it's just less relief from tax, there's a difference. How many of the nurses are paying 40% anyway, or will ever get that? Even if they got the pay bump they probably wouldn't be on that. The points I'm suggesting would be bringing in more money so people like nurses would be better off.

Same for doctors, pay them what they're worth, especially junior doctors (these get shafted the most), but again, when their worth goes into the higher tax bands it needs to be taxed too, like everyone else. Everyone in the higher bands needs to be taking a hit, and those furthest into the higher bands the most hit, which is what would happen, but they won't even barely notice. The nurse on 32k-50k would notice though, the idea is they should end up much better off from it overall, and they would.

Yes, the pension has been made worse, they only do this to save money, and I've been there when they've done that in the public sector, it was the same in the forces. But public sector pensions are still great and would be still great, much better than the average person in the private sector (for the same wage).