howard mcsweeney1- Location: Dover
- Registered: 12 Mar 2008
- Posts: 62,352
#1
courtesy of the sunday telegraph
Discussions have begun at the Treasury over the move which would see the axing of tax relief currently paid out on pension contributions by people who pay income tax at the higher rates of 40 per cent and 50 per cent.
The money saved could go towards cutting the budget deficit or - in what would be a more politically popular decision - be used to provide a significant increase to the value of the basic state pension.
Ministers last year studied similar plans but instead decided to reduce the amount of tax-free income that savers can put into pensions. That total was cut from £255,000 to £50,000 in a move which came into force in April.
However, The Sunday Telegraph understands that the plans for ending so-called "higher-rate" relief have restarted as Mr Osborne targets immediate cash flow savings as easy "wins". The policy was supported before the last general election by the Liberal Democrats.
Currently people paying into an occupational pension have amounts taken by their employers before tax is deducted - enabling them to get the full "relief" straight away.
those making contributions into a private pension - out of earned income - get immediate tax relief from the government at 20 per cent, the basic level of income tax.
Higher-rate taxpayers can claim the difference through their tax returns or by contacting HMRC - a form of relief that is now under threat from the treasury plans.
Some Conservative MPs expect the axing of higher-rate relief to be merely the first stage in a more extensive and radical plan which would end up with all tax relief - including on contributions made by people paying the basic 20p rate of income tax - being abolished, saving £22 billion a year in total.
Such raids, which could be announced in next year's Budget, would be greeted with howls of protest by the pensions industry.
However, experts estimate that abolition of all tax relief on pension contributions - except employer rebates which would be likely to be retained - could be used to boost the value of the basic state pension by up to half.
Currently a single person claiming the basic state pension gets £102.60 a week, although the pension credit system ensures that is topped up to a minimum of £137.35 a week, or £209.70 for couples.
Ministers have already announced plans for a new "flat-rate" pension, with payments to start in 2015 or 2016, worth at least £155 for new pensioners, whether they were single or part of a couple.
Saving £7 billion a year would be the equivalent of axing three government departments - Energy and Climate Change, whose budget is £2.9 billion a year, Environment Food and Rural Affairs, also £2.9 billion, and Culture, Media and Sport, (£1.5 billion).
Currently, people start paying 40p income tax at £42,475, while the threshold for 50p is £150,000.
The new raid would be unpopular among those being taxed at these rates and who are currently paying into pensions - particularly as it would likely come in at around the same time as higher-earners are scheduled to lose child benefit payments.
However, there is a growing body of opinion among Tory MPs that the highly controversial child benefit plan, announced at last year's Conservative conference, will not in fact be brought in.
If he abandons the plan to axe child benefit for the better off, Mr Osborne may still feel the need to target this group as he seeks to make savings.
A Treasury spokesman said: "All our plans in this area were announced in the Budget and we have no others."
Meanwhile Conservative and Liberal MPs are set to stage a rebellion this week over plans to speed up increases in the state pension age for women.
It is set to rise from 60 to 65 by 2018 - two years earlier than previously agreed - so the age for both sexes can then be increased to 66 by 2020. It will mean about 330,000 women in their late 50s will have to work for up to two years longer than planned.
Ahead of the second reading of the Pensions Bill in the Commons tomorrow James Gray, the Conservative MP, urged the coalition to think again.
"Going around the corridors and tea rooms in Westminster talking to Tories, Lib Dems and of course Labour MPs they are saying this is an injustice being done to a small number of people," he said.
Guest 696- Registered: 31 Mar 2010
- Posts: 8,115
#2
I pay my NI contribution, £2.60 a week, and am satisfied with that. If my earnings increase, I'd go for paying a higher level of NI contribution.
At the moment I'm in a phase of work development which is seeing my income increase, but I must cling to it, and can't afford to let the paint-brush get dry.
Every £10 counts; the heart is willing, the body is able.
Can't afford to worry about those earnong £150,000 + a year, may-be they don't know where to spend the money, that's their problem.
howard mcsweeney1- Location: Dover
- Registered: 12 Mar 2008
- Posts: 62,352
#3
you can be so selfish at times alex, some of these unfortunates have trout streams and grouse moors to pay for.
can you genuinely say that you have overheads like that?