Restricting pension tax relief to the basic rate of income tax, which is the suggestion to which that chapter refers, will promote social and economic justice, and for those ministers obsessed with the supposed funding of government spending, provide all the cover for the required compensation that they require in less than a year, so let’s not pretend otherwise. £14.5 billion a year could be raised by this one, simple, tax change. So, what is the problem in making that change?
Because it’s taking £14.5 billion a year off folk, that’s what the problem is.
Sheesh.
Plus of course this won’t apply to public sector workers (there’s no way he’s proposing their contribution rates should go up), so this would further exacerbate the public-private pension inequality that already exists,
But the man’s an ignorant fool, so he won’t address that challenge.
From a more serious source I would wonder if such talk was a precursor towards introducing a cumulative lifetime tax rate for all income. After all there’s a damned good chance that Labour will implement something similar for IHT by doing away with PETs or any other lifetime transfers.
However this is spud and he would prefer that anyone with the temerity to consider making provision for themselves, rather than rely entirely on big brother, be taxed twice – pour discourager les autres.
It’s the EMPLOYER’S contributions that are the real problem here for the public sector. With nominal employer contributions of up to 30% on some public sector pensions that would create a huge tax bill for the employee. So Spud side steps that by saying employer contributions won’t be included.
But that opens up an easy way to avoid the new charge the private sector. Instead of a job paying £80k of which you’ll be putting, say, £8k into a pension, you’ll be offered a job paying £72k but your employer will up their pension contributions by £8k.
The £14.5bn extra tax expected disappears. But the vanity projects will already be underway.
Andrew C:
This already formally exists; it’s called Salary Sacrifice.
Which, if Spud wants his way, will have to be taken into account. As would preventing any other attempts to re-implement it in every way except name.
But given the extensive* knowledge that he’s demonstrated previously in this sort of area, won’t have occurred to him yet. And when it does, it’ll be some half-cooked implementation with more holes than the combined content of Tolley’s.
* for various definitions of the word ‘extensive’
Why is it that people who would look comfortable in jackboots like to talk about social and economic justice so much?
TMB
Because the jackboot types were all national socialists.
It is never considered that the Government might be spending too much is it? I imagine so called essential services are a long way down the list of things that the state passes away money on.
“will promote social and economic justice”
I’ve a suggestion for social and economic justice. It’s hard to believe in these days of housing shortage and extortionate rents, but there are single people who live in houses with 3 public rooms and four bedrooms.
How about we tax the fvck out of these cvnts to penalise them for their opulent lifestyles? Or simply compulsorily purchase their properties for say 25% of market value. Exemptions available if all rooms are let out at peppercorn rents, because you know, rentiers are despicable scvm.
“PJH
Andrew C:
Instead of a job paying £80k of which you’ll be putting, say, £8k into a pension, you’ll be offered a job paying £72k but your employer will up their pension contributions by £8k.
This already formally exists; it’s called Salary Sacrifice.”
Not quite. Under salary sacrifice, the contribution is still considered to be the employee’s contribution. What I’m suggesting would make it the employer’s contribution.
It really isn’t. At least the government and pension companies most certainly treat the whole contribution as an employer contribution, rather than that from the employee.
Employers and employees can think of it how they wish.
The thinking being that with SS, you’re giving up salary so (1) the employee no longer pays NI on the contribution and (2) nor does the employer pay their part of NI either.
Also the employee contract stipulates (or should) that the new gross wage is that with the SS deducted (with the balance being the employer contribution.) The employee never sees the money in their wage slip. They’re never “given” it to begin with.
Contrasted with Net-Pay, you’re actually given the full salary in your gross pay, then the (employee) contribution taken off before the IT calculation (but after the NI calculation, including employer’s contribution) hence the employee has been deemed to receive the contribution via their pay.
Relief at Source, is obviously after both IT and NI, so they definitely receive it.
Is salary sacrifice worth it?
Not true, in my case. However, it isn’t clear from my payslip where the salary sacrifice amount is going to.
The tapered annual allowance already takes away five-sixths of the available higher-rate tax relief for salaries over 260k/year.
It may be that the way they account for it internally on your payslip may make it look like that (see above about “Employers [… ] can think of it how they wish.”) but HMRC and your pension company are most certainly treating it all as employer contribution.
Then I believe you may have a different problem if you cannot reconcile pension contributions made from payroll to those made to your pension fund holder. (Indeed, your reply suggosts you may not even know who that provider is!)
Specifically, to note one instance, contributions taken in one month MUST, by law, be paid to the provider by the 22nd of the month after they’re taken; is that happening for you, for example?
Does Murphy suggest that all pensions in payment have the tax charged limited to the basic rate?
Er, why not?
Does he want all middle-aged nurses to pay tax on 150% of the nominal pay?
“Speaking” (writing) as a mathematician (and someone who has never been liable to higher rate tax thanks to mortgage tax relief, Gift Aid and, in the pre-Gift Aid era, Covenants) I find Murphy’s suggestion morally offensive. Tax law treats pensions as deferred pay so tax is due on the pensions when they are received and the appropriate tax rate will depend on the rate determined by the then Chancellor of the Exhequer. As no-one knows how long he/she will live after retirement, no-one knows the *value*, as distinct from the amount, of their and their employer’s contribution to the pension scheme so how can HMRC? He wants someone who dies aged 60 (or 65 or …) to pay higher rate (but not basic rate) tax on money that he never received and never will receive.
Will Murphy’s next move be to charge tax on dividends declared but not paid by companies that go bust?
PJH, I mentioned on another thread about a problem I had with the agency who dealt with deductions / PAYE for a short term contract I was on.
They deducted ‘Employers pension contributions’ from the rate I had agreed with the company I was contracting for. I am retired and in receipt of my pension. After me asking the agency “where did those pension contributions go?” they tell me they are going to return them to the the company who I contracted for. That company have told me they won’t know what to do with the money as I do not have an active pension with them and that the money should have been paid into a pension.
You had added a bit more to this particular problem.
John 77
Murphy effectively wants all private money to become the property of the state. That’s because among other things he imagines the state would always be run by people with his political beliefs.
From his perspective tax relief for higher rate taxpayers on pensions is ‘welfare for the wealthy’ – it’s a deep seated delusion with very long roots on the Left.
@TMB:
“like to talk about social and economic justice”
You have to remember that “social” is a prefix that means “not”.
Does this mean Murphy has taken his own pension after no doubt having maximised his own pension contributions? I assume so as he will never propose anything which would involve him paying more tax.
Well done the Ipswich player who got the word anal into his post on power and football.
The thing is that it will do that £14.5bn of damage, but it won’t raise £14.5bn because people will change their behaviour. Of course they don’t in Spud’s world because he’s never met people.
Anyone who uses the term ‘social justice’ needs to be given a fucking good dose of the hobnails.