corto
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Post by corto on Sept 9, 2021 14:22:08 GMT
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jonno
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Post by jonno on Sept 9, 2021 14:23:58 GMT
Whilst I don't particularly disagree on your final point, hasn't the lock been set at 2.5% or CPI which ever is HIGHER? I gathered that this year it will be 2.5%, end of. Whatever the inflation number is No. It is now a "double lock"; the higher of 2.5% or CPI. Crossed with corto
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Post by Deleted on Sept 9, 2021 14:45:24 GMT
I think that any doctor who has fought their way into the education system and the constrained limited of doctor training 40 years ago, put up with the terrible hours of work under the intense pressures of possible errors and the emotional stresses that come with that would appreciate the opportunity to retire early.
Alternatively, perhaps the Doctor's union should be sanctioned for having done such a great job of making sure Doctors are paid so well.
My dentist took part in one of the negotiations for a pay increase for that group and said negotiations with the NHS were like taking candy from a baby, they actually tried to stop the employers offering so much at one point it was so embarassing.
So, my final thought. Why is there an upper limit on SIPP value at all? Who benefits?
I didn't think there was. I thought it was just the amount of tax relief that was limited. But I'm still not really sure who benefits. If you want people to develop a pension so they are not burdens on the state then why constrain it at all? After all if it is retained in the SIPP you are going to get 40% of the SIPP back as death tax anyway at some point if it has not been spent. Over the long term, no ones gains by the limit. In fact it could be argued that the tax "take" would be higher if there was no SIPP tax relief limit.
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corto
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Post by corto on Sept 9, 2021 15:16:59 GMT
There must be a limit because otherwise some people can put very large amounts of money in and the tax payer must augment it by 40%. The current limit supports an excellent pension income higher than average wage, and much higher than minimum wage, and it is not the community's job to support a luxury life style beyond that. The money is needed elsewhere.
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pikestaff
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Post by pikestaff on Sept 9, 2021 16:17:37 GMT
I think that any doctor who has fought their way into the education system and the constrained limited of doctor training 40 years ago, put up with the terrible hours of work under the intense pressures of possible errors and the emotional stresses that come with that would appreciate the opportunity to retire early.
Alternatively, perhaps the Doctor's union should be sanctioned for having done such a great job of making sure Doctors are paid so well.
My dentist took part in one of the negotiations for a pay increase for that group and said negotiations with the NHS were like taking candy from a baby, they actually tried to stop the employers offering so much at one point it was so embarassing.
So, my final thought. Why is there an upper limit on SIPP value at all? Who benefits?
I didn't think there was. I thought it was just the amount of tax relief that was limited. You are half right. Tax relief on the way in is limited by the Annual Allowance, but there is nothing to stop you contributing more. The Lifetime Allowance limits the value of the pension pot that can be built up without adverse tax consequences on the way out. Those consequences can be so penal that higher earners in defined benefit schemes may decide to cut their hours or retire early in order to avoid them. It's not just top earners either. Some primary school head teachers with a lifetime teaching could be caught out. As for @bobo 's question, it comes down (as always) to history and politics. At the start of the century there was a plethora of tax regimes (eight altogether) for different types of pension scheme. A consultation was launched with a view to simplifying the system, to bring in a single set of rules for all schemes. This was at the fag end of Cool Britannia, when the Blair government was still cosying up to pop stars and other celebrities. Someone had the bright idea of dramatically increasing the amount of annual tax contributions that could attract tax relief, so that someone who earned a lot in a short period could build up a serious pension pot, tax free. To prevent abuse of the system, it was suggested that a new lifetime allowance be introduced. And this is what they did. With effect from 6 April 2006, the Annual Allowance was set at £215,000 (I kid you not) and the new Lifetime Allowance was set at £1.5 million. Even at this level, the Lifetime Allowance caused problems for high earners in defined benefit schemes. There's a strong argument that it was the final death knell for private sector defined benefit schemes, since the directors of the companies running them no longer saw any benefit for themselves. Over the remaining Blair/Brown years, the annual and lifetime allowances were steadily increased, reaching £255,000 and £1.8 million respectively from 6 April 2010. A less socialist policy would be hard to imagine. Then the Tories came in. Faced with the need to make ends meet without raising headline tax rates they slashed the annual allowance to £50,000 (sorry, celebs). Later they reduced it further to £40,000, while reducing the lifetime allowance in stages to £1 million. Since 2018 the lifetime allowance has been indexed to CPI inflation but the annual allowance has remained frozen at £40,000. Setting the lifetime allowance at a relatively low level has two "benefits" that I can see: Firstly it reduces the overall cost to the exchequer of pensions tax relief. However it does this in a rather ineffective way, because the tax charges are levied on the way out. Hence the short term benefit to the exchequer (which really needs the cash now) is limited. Secondly, and I think this is the real reason, it changes behaviour. Instead of putting money away in pension schemes, most of which are managed by institutions (SIPPs being very much a minority sport), people are encouraged to invest it for themselves: in their homes, in buy-to-let, and in the biggest middle class tax subsidy of all, ISAs.
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Post by Deleted on Sept 10, 2021 6:36:35 GMT
The other thoughts that came to mind are
1) Finding staff at the moment is very very difficult in a lot of parts of the country, any good negotiator should be able to pass part of this cost onto the employer
2) The Trade Unions recently suggests an additional 3 days holiday which is roughly equivalent to a 1.25% tax on jobs, and yet strangely, Starmer did not condemn that idea
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corto
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Post by corto on Sept 10, 2021 12:22:10 GMT
I didn't think there was. I thought it was just the amount of tax relief that was limited. > You are half right. Tax relief on the way in is limited by the Annual Allowance, but there is nothing to stop you contributing more. nothing .. beside the 50% or so tax on the excess? > This was at the fag end of Cool Britannia, when the Blair government was still cosying up to pop stars and other celebrities. Someone had the bright idea of dramatically increasing the amount of annual tax contributions that could attract tax relief, so that someone who earned a lot in a short period could build up a serious pension pot, tax free. To prevent abuse of the system, it was suggested that a new lifetime allowance be introduced. Someone, someone, are the words used in fake news > And this is what they did. With effect from 6 April 2006, the Annual Allowance was set at £215,000 (I kid you not) and the new Lifetime Allowance was set at £1.5 million. Even at this level, the Lifetime Allowance caused problems for high earners in defined benefit schemes. There's a strong argument that it was the final death knell for private sector defined benefit schemes, since the directors of the companies running them no longer saw any benefit for themselves. What you are suggesting here means that even though their LTA was increased to 215K they still didn't like it's enough and therefore destroyed it ... hmm .. not sure > Over the remaining Blair/Brown years, the annual and lifetime allowances were steadily increased, reaching £255,000 and £1.8 million respectively from 6 April 2010. A less socialist policy would be hard to imagine. Can you please expand on why a policy that only benefits the upper 1% is a "socialist" one? The majority of people would never reach even 25k pension contribution pa. > Then the Tories came in. Faced with the need to make ends meet without raising headline tax rates they slashed the annual allowance to £50,000 (sorry, celebs). Later they reduced it further to £40,000, while reducing the lifetime allowance in stages to £1 million. Since 2018 the lifetime allowance has been indexed to CPI inflation but the annual allowance has remained frozen at £40,000. These seem reasonable numbers and policies to me, even though I am pretty much middle left > Firstly it reduces the overall cost to the exchequer of pensions tax relief. However it does this in a rather ineffective way, because the tax charges are levied on the way out. Hence the short term benefit to the exchequer (which really needs the cash now) is limited. I don't get this argument after the first "." The sentence before that dot I share. > Secondly, and I think this is the real reason, it changes behaviour. Instead of putting money away in pension schemes, most of which are managed by institutions (SIPPs being very much a minority sport), people are encouraged to invest it for themselves: in their homes, in buy-to-let, and in the biggest middle class tax subsidy of all, ISAs. "behavioural change" is polit-romance and doesn't work, see obesity, alcoholism, covidiocy, right wing and left wing extremism, etc ... as a democratic government you leave these things to others (who also can't really control them) I think your first reason is the main one. A more financially aware population is not in the interest of the ruling class. They'd recognise what losers they are and who screws them. As for the second reason: Why would the gov bother whether you invest your money yourself or leave it to a PA or a fund manager or just put it on a bank account? In either case it goes into funds/shares, thereby supporting industry and growth. The tax man pays 20-45% for pensions at point of investment but may well grab it back when the pension is paid out (including parts of the investment gains). It takes 20-45% from ISA funds but afterwards doesn't see a penny from any gains on that. At the point of death the pension providers get the capital on pensions and the gov gets the inheritance tax on ISAs. Intuitively I'd say the gov could make more money on the long-term on pensions (which I think is what bobo suggested in a previous comment) although they cost a lot more "now". Given that the money you have is worth more that the money you may make, and you can basically only spend what you have now even as a government, I still think the ongoing overall cost to the exchequer is the main reason for the pension relief limits.
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corto
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Post by corto on Sept 10, 2021 12:23:53 GMT
The other thoughts that came to mind are
1) Finding staff at the moment is very very difficult in a lot of parts of the country, any good negotiator should be able to pass part of this cost onto the employer
2) The Trade Unions recently suggests an additional 3 days holiday which is roughly equivalent to a 1.25% tax on jobs, and yet strangely, Starmer did not condemn that idea
Thanks. You just made me realise that breaking the triple lock is a consequence of Brexit.
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hazellend
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Post by hazellend on Sept 10, 2021 13:12:33 GMT
The other thoughts that came to mind are
1) Finding staff at the moment is very very difficult in a lot of parts of the country, any good negotiator should be able to pass part of this cost onto the employer
2) The Trade Unions recently suggests an additional 3 days holiday which is roughly equivalent to a 1.25% tax on jobs, and yet strangely, Starmer did not condemn that idea
Thanks. You just made me realise that breaking the triple lock is a consequence of Brexit. It’s the gift that keeps on giving 😂
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pikestaff
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Post by pikestaff on Sept 10, 2021 15:31:24 GMT
> You are half right. Tax relief on the way in is limited by the Annual Allowance, but there is nothing to stop you contributing more. nothing .. beside the 50% or so tax on the excess? Nothing whatsoever to stop you paying more than the annual allowance, you just don't get tax relief on the excess. Of course, if you pay too much over a period of time you will breach the lifetime allowance but that's a separate issue.> This was at the fag end of Cool Britannia, when the Blair government was still cosying up to pop stars and other celebrities. Someone had the bright idea of dramatically increasing the amount of annual tax contributions that could attract tax relief, so that someone who earned a lot in a short period could build up a serious pension pot, tax free. To prevent abuse of the system, it was suggested that a new lifetime allowance be introduced. Someone, someone, are the words used in fake news Were you there at the time? I was and was taking a keen interest in the discussion. I can assure you that the bright idea was all about helping people whose career might burn briefly but brightly to put away a decent pension. Golfers, tennis players, professional footballers were also mentioned, as well as people in more ordinary jobs who just got a windfall bonus for whatever reason.> And this is what they did. With effect from 6 April 2006, the Annual Allowance was set at £215,000 (I kid you not) and the new Lifetime Allowance was set at £1.5 million. Even at this level, the Lifetime Allowance caused problems for high earners in defined benefit schemes. There's a strong argument that it was the final death knell for private sector defined benefit schemes, since the directors of the companies running them no longer saw any benefit for themselves. What you are suggesting here means that even though their LTA was increased to 215K they still didn't like it's enough and therefore destroyed it ... hmm .. not sure You've mixed up the two allowances here. The annual allowance of £215k was not the issue. The Lifetime Allowance was. A main board director of a FTSE-350 PLC with a DB scheme would almost certainly have accrued a pension entitlement in excess of £100k pa (more likely a multiple of that). For Lifetime Allowance purposes you have to multiply the initial pension by 20. £100k x 20 = £2m which is over the limit. > Over the remaining Blair/Brown years, the annual and lifetime allowances were steadily increased, reaching £255,000 and £1.8 million respectively from 6 April 2010. A less socialist policy would be hard to imagine. Can you please expand on why a policy that only benefits the upper 1% is a "socialist" one? The majority of people would never reach even 25k pension contribution pa. Read again. I said it's the opposite of socialist!> Then the Tories came in. Faced with the need to make ends meet without raising headline tax rates they slashed the annual allowance to £50,000 (sorry, celebs). Later they reduced it further to £40,000, while reducing the lifetime allowance in stages to £1 million. Since 2018 the lifetime allowance has been indexed to CPI inflation but the annual allowance has remained frozen at £40,000. These seem reasonable numbers and policies to me, even though I am pretty much middle left I'm happy with the annual allowance. I do think the lifetime allowance at the current level has unintended consequences and it would be better if it were raised to a level which did not push doctors to leave the profession.> Setting the lifetime allowance at a relatively low level has two "benefits" that I can see:> Firstly it reduces the overall cost to the exchequer of pensions tax relief. However it does this in a rather ineffective way, because the tax charges are levied on the way out. Hence the short term benefit to the exchequer (which really needs the cash now) is limited. I don't get this argument after the first "." The sentence before that dot I share. You missed out a sentence of mine, which is necessary to make sense of what follows. I've reinstated it in red above.
The answer is cash flow. If the money from restricting the lifetime allowance does not flow back to the exchequer for 20 years (say) it does not help the cash position now (in contrast to the slashing of the annual allowance, which did).> Secondly, and I think this is the real reason, it changes behaviour. Instead of putting money away in pension schemes, most of which are managed by institutions (SIPPs being very much a minority sport), people are encouraged to invest it for themselves: in their homes, in buy-to-let, and in the biggest middle class tax subsidy of all, ISAs. "behavioural change" is polit-romance and doesn't work, see obesity, alcoholism, covidiocy, right wing and left wing extremism, etc ... as a democratic government you leave these things to others (who also can't really control them) Some things do have effects (at least partly) and I think this is one of them. If people are not putting their cash into pensions they will either put it somewhere else or spend it (and I'm sure the govt would not have minded some leakage into current spending).I think your first reason is the main one. A more financially aware population is not in the interest of the ruling class. They'd recognise what losers they are and who screws them. I don't think it works like that. I think the Tories see pensions as a bit "nanny state", whereas self-investment (in homes, buy-to-let, and ISAs) makes people more "self reliant" and more likely to vote conservative.As for the second reason: Why would the gov bother whether you invest your money yourself or leave it to a PA or a fund manager or just put it on a bank account? In either case it goes into funds/shares, thereby supporting industry and growth. See previous comment.The tax man pays 20-45% for pensions at point of investment but may well grab it back when the pension is paid out (including parts of the investment gains). It takes 20-45% from ISA funds but afterwards doesn't see a penny from any gains on that. At the point of death the pension providers get the capital on pensions and the gov gets the inheritance tax on ISAs. Intuitively I'd say the gov could make more money on the long-term on pensions (which I think is what bobo suggested in a previous comment) although they cost a lot more "now". Given that the money you have is worth more that the money you may make, and you can basically only spend what you have now even as a government, I still think the ongoing overall cost to the exchequer is the main reason for the pension relief limits. You've not got pensions quite right. The amount pension providers pay out includes capital. Some people will get back more than they pay in, and others will get less. Averaged over the population the two sides should net out so that the pension providers are left with none, except for a margin. I agree ISAs cost more (pound for pound) than pensions, particularly as hardly anyone pays inheritance tax. I'd like to see lifetime limits on ISAs, and a wholesale reform of inheritance tax to make it less voluntary and ensure that inheritances (including the value of homes) are properly taxed. Inheritance is the biggest driver of inequality in the UK and it's getting worse. That's a whole other discussion, but I would add that I think a reformed inheritance tax would be the right way for the government to fund its social care cap.
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Post by Deleted on Sept 10, 2021 16:36:51 GMT
The other thoughts that came to mind are
1) Finding staff at the moment is very very difficult in a lot of parts of the country, any good negotiator should be able to pass part of this cost onto the employer
2) The Trade Unions recently suggests an additional 3 days holiday which is roughly equivalent to a 1.25% tax on jobs, and yet strangely, Starmer did not condemn that idea
Thanks. You just made me realise that breaking the triple lock is a consequence of Brexit. Much as I dislike Brexit and do appreciate being thanked I can't make the logical jump that you have managed.
I do see that the quality of the Ministers in the present government is severly constrained by them having to be dumb enough to support Brexit but I don't want or intend to start that arguement again.
When minimum wages were first mooted I was uncertain about them but now I've gotten to understand them I like the idea of raising the figure a fair bit, I also think that getting the £20 bonus is making some dead-end jobs untenable and I'd like to phase it out at the same time as pushing up the minimum wage but I'm not in charge at the Treasury.
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keitha
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Post by keitha on Sept 11, 2021 10:47:08 GMT
When minimum wages were first mooted I was uncertain about them but now I've gotten to understand them I like the idea of raising the figure a fair bit, I also think that getting the £20 bonus is making some dead-end jobs untenable and I'd like to phase it out at the same time as pushing up the minimum wage but I'm not in charge at the Treasury.
yes in some areas the £20 Boost has indeed made working a no brainer, for some in effect the value of Working is less than £1 per hour, ie they are £30 a week better off in work than on benefits. It would also appear that the temporary boost was paid to each claimant. So 4 adults in a house a married couple and 2 adult children have had a boost of £60 a week to the family income. For me one issue was that this boost which was supposed to help people with extra costs during the pandemic wasn't fairly distributed across society. Did the low paid front line carers get anything ? Did pensioners get anything ? answer is no in both cases
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keitha
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Post by keitha on Sept 11, 2021 10:50:54 GMT
been talking to a pensioner friend this morning he's glad the triple lock was broken. for a very simple and selfish reason, had it been applied he'd have lost benefits due to the increase and would have been worse off with a £15 rise in the pension that with a £5 rise !
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