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surrey_commuter

Stevo_666 said:

surrey_commuter said:

The logic of incentivising people to save into their pensions is so that they are nor dependent upon the state, I think £1m is enough to achieve this. The other rules are unnecessarily complicated.

Foregone tax on contributions is about £20bn a year so well worth chipping away at.

Already been chipped at quite a bit.

There are two limits: one is the overall value of the pot and the other is how much you can get a tax deduction for each year. Both have been restricted.

My point was that the restrictions on the annual allowance are unnecessarily complicated and that it is a big sum of money so expect more chipping

Stevo_666

surrey_commuter said:

Stevo_666 said:

surrey_commuter said:

The logic of incentivising people to save into their pensions is so that they are nor dependent upon the state, I think £1m is enough to achieve this. The other rules are unnecessarily complicated.

Foregone tax on contributions is about £20bn a year so well worth chipping away at.

Already been chipped at quite a bit.

There are two limits: one is the overall value of the pot and the other is how much you can get a tax deduction for each year. Both have been restricted.

My point was that the restrictions on the annual allowance are unnecessarily complicated and that it is a big sum of money so expect more chipping

They are definitely complicated. However the desire to chip away needs to be balanced with the longer term risk of people not saving enough for retirement.

I would not have put anywhere near as much into my pension schemes in the past if the tax relief had not been available.

surrey_commuter

Stevo_666 said:

surrey_commuter said:

Stevo_666 said:

surrey_commuter said:

The logic of incentivising people to save into their pensions is so that they are nor dependent upon the state, I think £1m is enough to achieve this. The other rules are unnecessarily complicated.

Foregone tax on contributions is about £20bn a year so well worth chipping away at.

Already been chipped at quite a bit.

There are two limits: one is the overall value of the pot and the other is how much you can get a tax deduction for each year. Both have been restricted.

My point was that the restrictions on the annual allowance are unnecessarily complicated and that it is a big sum of money so expect more chipping

They are definitely complicated. However the desire to chip away needs to be balanced with the longer term risk of people not saving enough for retirement.

I would not have put anywhere near as much into my pension schemes in the past if the tax relief had not been available.

So long as they are not dependent upon the state then it is their problem if they have not saved enough to fund the lifestyle they desire.

I also think ISAs are a crazy use of scarce Govt resources.

rick_chasey

I imagine the Tory policy of 'free hospital parking if your are visiting someone who is terminally ill' will cause some fairly awkward conversations....

surrey_commuter

rick_chasey said:

I imagine the Tory policy of 'free hospital parking if your are visiting someone who is terminally ill' will cause some fairly awkward conversations....

maybe they could issue them with distinctive armbands they can slip off before going in to reassure their relative that they will be home in time for Xmas

Ben6899

rjsterry said:

Stevo_666 said:

rick_chasey said:

rick_chasey said:

rjsterry said:

rick_chasey said:

rjsterry said:

kingstongraham said:

Only seen the clip from Question Time, but I think the guy who earns £80k and thinks he is on an average wage is quite representative. It's very difficult to think of yourself as well off when the people around you seem to be in about the same situation.

Saw that last night. Was quite surreal. I even felt slightly sorry for Richard Burgon trying to come up with a response to someone with such a tenuous grip on reality.

I think the guy lost the nuance of his point in his rage and it's always really difficult to row back from the point that got you ragey to explain the nuance.

Is the message here not that people on £80k don't feel well off? Presumably because you'l still be spending 20% of your income on childcare when on £80k, for example.

I think that's quite revealing of the state we're in. I wouldn't get in a flap about it because I have some perspective on earnings, but I would absolutely not call myself well off on £80k, especially in the south east.

Errr, what?!

I think a career in high-end recruitment has given you a slightly skewed perspective.

Ok, if you have two kids under 2, and they're in nursery, that's around £30k after tax gone before you even have to feed them and put a roof over their head. Bear in mind net earnings after tax are c.£54k, so you're alrady down to £4k a month to pay the mortgage and food and everything else. £400k mortgage will roughly set you back what, between £1600 and £1800 a month. So you've got just over £400 a week left for food and sundries.

You think that's 'well off'? Not in my understanding of what 'well off' means.

My maths is off. Not right. Updated...

So you have roughly £150 a week on food, leaving you with £250 per week for everything else.

Have to admit I'm with you on this one Rick - although clearly it is subjective as to what 'well off' means and there's a massive difference between someone who's single and on £80k and someone who's supporting a family etc on the same income.

And going back to the point about £80k, this is the income level at which Labour deems someone to be rich. With £125k as the threshold for super rich.

Whether it's 'rich' or not it does put you into the 95th percentile. Perhaps that is an indication of just how steep the curve gets in the top 5%. The 99th percentile is double the 95th at £166,000, and I have met plenty of people who think of that as just-about-managing.

One's lifestyle changes as one's income/wealth increases, it's all relative. One finds ways to spend the money.

Assuming an increase in income/wealth proportional to age, one only has to compare how they lived when 20something to now (generally speaking, I appreciate it's not linear and sometimes an inverse relationship depending on what life throws).

I need to start being wiser with pension contributions as well, as mentioned upthread, but it's a balancing act with the mortgage as I aim to retire at 55.

Dorset_Boy

Having both an annual (contribution) allowance and a lifetime (fund) allowance is plain daft, it should be one or the other. And reducing the annual allowance for high earners isn't a very good idea either.

There should also be a flat rate of tax relief on pensions. Over my working life, basic rate tax relief on contributions has fallen from 33% to 20%, whereas for higher rate tax payers it has remained at 40%. So those who need to save more than anyone else (to not be dependent on the state in older age) have had their tax relief cut hugely.

Stevo_666

surrey_commuter said:

Stevo_666 said:

surrey_commuter said:

Stevo_666 said:

surrey_commuter said:

The logic of incentivising people to save into their pensions is so that they are nor dependent upon the state, I think £1m is enough to achieve this. The other rules are unnecessarily complicated.

Foregone tax on contributions is about £20bn a year so well worth chipping away at.

Already been chipped at quite a bit.

There are two limits: one is the overall value of the pot and the other is how much you can get a tax deduction for each year. Both have been restricted.

My point was that the restrictions on the annual allowance are unnecessarily complicated and that it is a big sum of money so expect more chipping

They are definitely complicated. However the desire to chip away needs to be balanced with the longer term risk of people not saving enough for retirement.

I would not have put anywhere near as much into my pension schemes in the past if the tax relief had not been available.

So long as they are not dependent upon the state then it is their problem if they have not saved enough to fund the lifestyle they desire.

I also think ISAs are a crazy use of scarce Govt resources.

I think one issue here is that quite a few will end up being at least partially dependent on the state because they have not saved enough into their pension. I admit I am speculating here but from what I hear of the amounts in some peoples pension funds it makes me think in general a lot of people are not saving anywhere near enough.

Ben6899

Stevo_666 said:

surrey_commuter said:

Stevo_666 said:

surrey_commuter said:

Stevo_666 said:

surrey_commuter said:

The logic of incentivising people to save into their pensions is so that they are nor dependent upon the state, I think £1m is enough to achieve this. The other rules are unnecessarily complicated.

Foregone tax on contributions is about £20bn a year so well worth chipping away at.

Already been chipped at quite a bit.

There are two limits: one is the overall value of the pot and the other is how much you can get a tax deduction for each year. Both have been restricted.

My point was that the restrictions on the annual allowance are unnecessarily complicated and that it is a big sum of money so expect more chipping

They are definitely complicated. However the desire to chip away needs to be balanced with the longer term risk of people not saving enough for retirement.

I would not have put anywhere near as much into my pension schemes in the past if the tax relief had not been available.

So long as they are not dependent upon the state then it is their problem if they have not saved enough to fund the lifestyle they desire.

I also think ISAs are a crazy use of scarce Govt resources.

I think one issue here is that quite a few will end up being at least partially dependent on the state because they have not saved enough into their pension. I admit I am speculating here but from what I hear of the amounts in some peoples pension funds it makes me think in general a lot of people are not saving anywhere near enough.

Some people have money in other places though, which serves as a pension of sorts. Right?

Like owning an expensive house, which you'll then downsize when the kids move out... that kind of thing. Or... and I know one bloke... Liberia's GDP under the spare bedroom floorboards!

Stevo_666

ben6899 said:

Stevo_666 said:

surrey_commuter said:

Stevo_666 said:

surrey_commuter said:

Stevo_666 said:

surrey_commuter said:

The logic of incentivising people to save into their pensions is so that they are nor dependent upon the state, I think £1m is enough to achieve this. The other rules are unnecessarily complicated.

Foregone tax on contributions is about £20bn a year so well worth chipping away at.

Already been chipped at quite a bit.

There are two limits: one is the overall value of the pot and the other is how much you can get a tax deduction for each year. Both have been restricted.

My point was that the restrictions on the annual allowance are unnecessarily complicated and that it is a big sum of money so expect more chipping

They are definitely complicated. However the desire to chip away needs to be balanced with the longer term risk of people not saving enough for retirement.

I would not have put anywhere near as much into my pension schemes in the past if the tax relief had not been available.

So long as they are not dependent upon the state then it is their problem if they have not saved enough to fund the lifestyle they desire.

I also think ISAs are a crazy use of scarce Govt resources.

I think one issue here is that quite a few will end up being at least partially dependent on the state because they have not saved enough into their pension. I admit I am speculating here but from what I hear of the amounts in some peoples pension funds it makes me think in general a lot of people are not saving anywhere near enough.

Some people have money in other places though, which serves as a pension of sorts. Right?

Like owning an expensive house, which you'll then downsize when the kids move out... that kind of thing. Or... and I know one bloke... Liberia's GDP under the spare bedroom floorboards!

This can be true, but the point still stands as I reckon a significant the people who will not bother saving enough for their pension will not be saving enough, full stop. Also I would think that the housing equity point is more a thing for those in their mid-forties and older (at the risk of generalising).

Ben6899

Stevo_666 said:

ben6899 said:

Stevo_666 said:

surrey_commuter said:

Stevo_666 said:

surrey_commuter said:

Stevo_666 said:

surrey_commuter said:

The logic of incentivising people to save into their pensions is so that they are nor dependent upon the state, I think £1m is enough to achieve this. The other rules are unnecessarily complicated.

Foregone tax on contributions is about £20bn a year so well worth chipping away at.

Already been chipped at quite a bit.

There are two limits: one is the overall value of the pot and the other is how much you can get a tax deduction for each year. Both have been restricted.

My point was that the restrictions on the annual allowance are unnecessarily complicated and that it is a big sum of money so expect more chipping

They are definitely complicated. However the desire to chip away needs to be balanced with the longer term risk of people not saving enough for retirement.

I would not have put anywhere near as much into my pension schemes in the past if the tax relief had not been available.

So long as they are not dependent upon the state then it is their problem if they have not saved enough to fund the lifestyle they desire.

I also think ISAs are a crazy use of scarce Govt resources.

I think one issue here is that quite a few will end up being at least partially dependent on the state because they have not saved enough into their pension. I admit I am speculating here but from what I hear of the amounts in some peoples pension funds it makes me think in general a lot of people are not saving anywhere near enough.

Some people have money in other places though, which serves as a pension of sorts. Right?

Like owning an expensive house, which you'll then downsize when the kids move out... that kind of thing. Or... and I know one bloke... Liberia's GDP under the spare bedroom floorboards!

This can be true, but the point still stands as I reckon a significant the people who will not bother saving enough for their pension will not be saving enough, full stop. Also I would think that the housing equity point is more a thing for those in their mid-forties and older (at the risk of generalising).

I agree with both points.

And I wouldn't worry about generalising, in here!

rick_chasey

I think growing up with the 'defined benefit' generation has lulled the following 'defined contribution' generation into a false sense of security.

Dorset_Boy

Part of the problem Rick is that those who still benefit from the DB world are those who make the rules and they haven't a fucking clue!

From experience, very few people downsize at retirement (except Down From Londoners!). Often, for example, grandchildren have arrived on the scene so they still need / want a family sized home. Downsizing tends to occur in the mid-70s when the larger property and garden become unmanageable.

Also saving is a habit, and needs to be instilled from a young age, but the 'I want it yesterday generation' would rather spend now than put money aside for the future. The save 50% of your payrise, spend 50% is a fantastic mantra.

Compulsion has been needed to get people saving, hence the massive failure of Gordon Brown's Stakeholder pension, but as Auto-Enrolment is compulsory, the success of Workplace Pensions in getting people saving.

rick_chasey

Dorset_Boy said:

Part of the problem Rick is that those who still benefit from the DB world are those who make the rules and they haven't a 20p for the swearbox clue!

From experience, very few people downsize at retirement (except Down From Londoners!). Often, for example, grandchildren have arrived on the scene so they still need / want a family sized home. Downsizing tends to occur in the mid-70s when the larger property and garden become unmanageable.

Also saving is a habit, and needs to be instilled from a young age, but the 'I want it yesterday generation' would rather spend now than put money aside for the future. The save 50% of your payrise, spend 50% is a fantastic mantra.

Compulsion has been needed to get people saving, hence the massive failure of Gordon Brown's Stakeholder pension, but as Auto-Enrolment is compulsory, the success of Workplace Pensions in getting people saving.

Sure; it's also a function of your circumstances.

My first two companies didn't offer a pension and certainly on my first two salaries I was barely able to make ends meet with what they were paying let alone set aside extra into a pension; it was so little the tax benefit was marginal and I took a view that having the money now was worth more than the tax benefit I got; at the expense of all those extra years of compound interest.

In the Netherlands they recommend putting 20-25% of your yearly earnings into your pension, fyi.

rick_chasey

Also you need to do the maths properly; is it worthwhile paying off your mortgage or putting into your pension? Presumably depends on your tax bracket.

etc etc.

It's the folk who are still paying off a mortgage deep into their 50s that I worry more about.

arthur_scrimshaw

Stevo_666 said:

surrey_commuter said:

rick_chasey said:

Stevo_666 said:

rick_chasey said:

What evidence is there to suggest we are already on the downward slope of the laffer curve?

A couple of examples:
- The last HMRC survey showing that the increase of the top income tax rate to 50% by the last Labour administration yielded pretty much nothing.
- The increase in the corporate tax revenues over the last while the CT rate has been declining.

What evidence is there to suggest that we are not?

So point one, if it’s correct, means we are at the top. I read that the Govt revs dropped around £1bn net after moving from 50% to 45%.

On point two; it’s more complicated than than in that if overall earnings are going up more than the cut they will continue to go up. That may be because of the tax rate but correlation is not causation by any stretch. For all we know govt revenues would have been even higher had the tax rate been higher.

I would imagine we are roughly at the inflexion anyway and your arguments for tax are more driven by personal preference and political ideology than optimising govt revenues.

I would be very surprised is Govt revenue declined when top rate fell to 45%. This is because everybody knew it was short term so deferred income.

I don't believe it did fall as Rick claimed. I'd like to see some evidence.

Was this ever resolved?

https://fullfact.org/economy/did-cutting-50p-rate-tax-raise-8-billion/

arthur_scrimshaw

This is interesting



https://fullfact.org/economy/are-high-earners-paying-greater-share-tax-2010/?utm_source=content_page&utm_medium=related_content

The Treasury estimates that in 2017/18 52% of the money it gets in taxes will have come from the top fifth of households, up from 49% in 2010/11. It says:

"This is due to the increases to the personal allowance and policies that increase taxes on the richest"

Stevo_666

rick_chasey said:

I think growing up with the 'defined benefit' generation has lulled the following 'defined contribution' generation into a false sense of security.

I've never had a DB pension but I definitely don't have a false sense of security - if anything it has made the point to me that I needed to plan properly for retiring.

Although one downside of the DB was that it stopped some people moving jobs to advance their careers as quite a few people I saw were staying in jobs simply because of the DB scheme knowing they wouldn't get it if they moved elsewhere. And in a way I'm glad that wasn't me.

Stevo_666

arthur_scrimshaw said:

Stevo_666 said:

surrey_commuter said:

rick_chasey said:

Stevo_666 said:

rick_chasey said:

What evidence is there to suggest we are already on the downward slope of the laffer curve?

A couple of examples:
- The last HMRC survey showing that the increase of the top income tax rate to 50% by the last Labour administration yielded pretty much nothing.
- The increase in the corporate tax revenues over the last while the CT rate has been declining.

What evidence is there to suggest that we are not?

So point one, if it’s correct, means we are at the top. I read that the Govt revs dropped around £1bn net after moving from 50% to 45%.

On point two; it’s more complicated than than in that if overall earnings are going up more than the cut they will continue to go up. That may be because of the tax rate but correlation is not causation by any stretch. For all we know govt revenues would have been even higher had the tax rate been higher.

I would imagine we are roughly at the inflexion anyway and your arguments for tax are more driven by personal preference and political ideology than optimising govt revenues.

I would be very surprised is Govt revenue declined when top rate fell to 45%. This is because everybody knew it was short term so deferred income.

I don't believe it did fall as Rick claimed. I'd like to see some evidence.

Was this ever resolved?

https://fullfact.org/economy/did-cutting-50p-rate-tax-raise-8-billion/

Here's HMRC's take on what happened when Labour raised it to 50% - long read but in summary, naff all and could well have driven away investment/tax payers.

https://webarchive.nationalarchives.gov.uk/20130127161217/hmrc.gov.uk/budget2012/excheq-income-tax-2042.pdf

Here's a quote from the summary:
"Although there is uncertainty around these estimates, sensitivity testing demonstrates that is difficult to construct a plausible outcome consistent with a yield estimate as high as those original forecasts. The conclusion that can be drawn from the Self Assessment data is therefore that the underlying yield from the additional rate is much lower than originally
forecast (yielding around £1 billion or less), and that it is quite possible that it could be
negative."

rjsterry

So if I have that right: raising it didn't change receipts beyond background variation and lowering the rate only created one bumper year because of one-off deferrals from the previous year. Hmm.

kingstongraham

rjsterry said:

So if I have that right: raising it didn't change receipts beyond background variation and lowering the rate only created one bumper year because of one-off deferrals from the previous year. Hmm.

I think it was a fairly unique situation that everyone knew they were going to lose, and they only did it to make the Conservatives cut taxes.

Of course, the Conservatives could have called their bluff, and seen over a few years whether the theory was right or wrong, but they already knew, so why bother?

Stevo_666

rjsterry said:

So if I have that right: raising it didn't change receipts beyond background variation and lowering the rate only created one bumper year because of one-off deferrals from the previous year. Hmm.

So why bother? In the end it was an act of political spite as KG mentioned.

Longer term we need to stay competitive in attracting investment and entrepreneurs.

surrey_commuter

rick_chasey said:

Also you need to do the maths properly; is it worthwhile paying off your mortgage or putting into your pension? Presumably depends on your tax bracket.

etc etc.

It's the folk who are still paying off a mortgage deep into their 50s that I worry more about.

With mortgage rate at 2% it can not possibly be better than paying into pension.

surrey_commuter

Saw something recently that Labour’s tax plans will raise £6bn and that is assuming behavioural changes reducing it from a potential £11bn.

Stevo_666

surrey_commuter said:

Saw something recently that Labour’s tax plans will raise £6bn and that is assuming behavioural changes reducing it from a potential £11bn.

Compared to how much planned spending?

kingstongraham

Stevo_666 said:

rjsterry said:

So if I have that right: raising it didn't change receipts beyond background variation and lowering the rate only created one bumper year because of one-off deferrals from the previous year. Hmm.

So why bother? In the end it was an act of political spite as KG mentioned.

Longer term we need to stay competitive in attracting investment and entrepreneurs.

Given the circumstances, it would have been politically better to keep it higher.

Stevo_666

kingstongraham said:

Stevo_666 said:

rjsterry said:

So if I have that right: raising it didn't change receipts beyond background variation and lowering the rate only created one bumper year because of one-off deferrals from the previous year. Hmm.

So why bother? In the end it was an act of political spite as KG mentioned.

Longer term we need to stay competitive in attracting investment and entrepreneurs.

Given the circumstances, it would have been politically better to keep it higher.

I would say that Labour should never have done it in the first place. As above, it was a parting act of political spite by the last New Labour Administration - and here it is again as part of New Old Labour's tax strategy, only with a lower threshold.

rick_chasey

Stevo_666 said:

kingstongraham said:

Stevo_666 said:

rjsterry said:

So if I have that right: raising it didn't change receipts beyond background variation and lowering the rate only created one bumper year because of one-off deferrals from the previous year. Hmm.

So why bother? In the end it was an act of political spite as KG mentioned.

Longer term we need to stay competitive in attracting investment and entrepreneurs.

Given the circumstances, it would have been politically better to keep it higher.

I would say that Labour should never have done it in the first place. As above, it was a parting act of political spite by the last New Labour Administration - and here it is again as part of New Old Labour's tax strategy, only with a lower threshold.

Think you need to stop whining and try to see the benefits and opportunities tbh.

It’s tiny tiny beer vs the hole Brexit will, and already has blow in finances.

Stevo_666

rick_chasey said:

Stevo_666 said:

kingstongraham said:

Stevo_666 said:

rjsterry said:

So if I have that right: raising it didn't change receipts beyond background variation and lowering the rate only created one bumper year because of one-off deferrals from the previous year. Hmm.

So why bother? In the end it was an act of political spite as KG mentioned.

Longer term we need to stay competitive in attracting investment and entrepreneurs.

Given the circumstances, it would have been politically better to keep it higher.

I would say that Labour should never have done it in the first place. As above, it was a parting act of political spite by the last New Labour Administration - and here it is again as part of New Old Labour's tax strategy, only with a lower threshold.

Think you need to stop whining and try to see the benefits and opportunities tbh.

It’s tiny tiny beer vs the hole Brexit will, and already has blow in finances.

Just telling it how it is.

Sounds like there's an implied whine that it wouldn't affect you anyway

Now keep it on topic and give the whataboutery a break.

rick_chasey

In what way is it whaterboutery?

Brexit has a much bigger impact on UK finances than changing the top rate of income tax from 50 to 45.