[Politics] The Labour Government

[Bodian]

The beauty of increasing NIC from the government's point of view (at least employer's NIC, which I would presume they are on about) is that it only affects the private sector. Effectively, employer's NIC doesn't affect public sector workers because the government is paying it to itself. So they can hit the private sector without affecting the public sector.

I'm in a small local authority. Our income from commercial operations (car parking mainly) is greater than our 'grant' from central government. Most other local authorities have also had their central government funding cut drastically as well - and now council tax makes up around 25% of their budget, add in local business rates and commercial income. And you are looking at a vast amount of money in local government not being centrally funded.

So, it is not correct to say that NI does not affect public sector workers. We pay our NI to central government, not to ourselves. So, and employers NI increase will lead to more cuts to local services - so of course the public sector will be hit.

 

[amexer]

I see new workers rights coming in today. Are employers going to be happy about possibility of having to agree to flexible working from day one.

 

[dsr-burnley]

I'm in a small local authority. Our income from commercial operations (car parking mainly) is greater than our 'grant' from central government. Most other local authorities have also had their central government funding cut drastically as well - and now council tax makes up around 25% of their budget, add in local business rates and commercial income. And you are looking at a vast amount of money in local government not being centrally funded.

So, it is not correct to say that NI does not affect public sector workers. We pay our NI to central government, not to ourselves. So, and employers NI increase will lead to more cuts to local services - so of course the public sector will be hit.

You're assuming that it's beyond the wit of central government to adjust the grant. If your authority has to pay extra taxes to government, it would be trivial for government to increase its grant to your authority. And if it doesn't, it amounts to a change in allocation of government spending, not an increase in global government income or expenses.

 

[Bodian]

You're assuming that it's beyond the wit of central government to adjust the grant. If your authority has to pay extra taxes to government, it would be trivial for government to increase its grant to your authority. And if it doesn't, it amounts to a change in allocation of government spending, not an increase in global government income or expenses.

Yes - it seems beyond the wit of central government to adjust grants to local government other than downwards. If it doesn't change the grant it's not a reallocation of government spending, it's reduced spending by local government (same money in, more money out in NI = reduced services).

 

[Curious Orange]

Two organisations, the Fabian Society and the Institute for Fiscal Studies (IFS), have proposed such a measure since Labour won power, which according to the latter would impact one in five retirees.

In a report published on 11 September, the IFS said: “This subsidy to pension saving has an estimated long-run annual cost of £5.5 billion, with 70% of the relief going to pensions accumulated by those in the top fifth of earners when making their contributions.”

Reeves mulls pension tax-free cash raid

The move could affect one in five retirees and raise £2 billion a year for the Treasury as the chancellor seeks ways to prop up the nation’s finances.

www.ii.co.uk

The Fabian Society are pretty much communists, and their logo is literally a wolf in sheep's clothing. I am not surprised that they are in favour of this sort of thing.

People often forget that pensioners are subject to income tax on their annuities. The tax relief is to encourage you to save, so the tax is effectively deferred from the period whilst you are working, to the period you are retired.

I take a very dim view on raids on pension pots (which Labour have form for).

You then also have to ask what people are spending their tax free cash on? What proportion of that is on items subject to VAT?

 

[beorhthelm]

The Fabian Society are pretty much communists, and their logo is literally a wolf in sheep's clothing. I am not surprised that they are in favour of this sort of thing.

People often forget that pensioners are subject to income tax on their annuities. The tax relief is to encourage you to save, so the tax is effectively deferred from the period whilst you are working, to the period you are retired.

I take a very dim view on raids on pension pots (which Labour have form for).

You then also have to ask what people are spending their tax free cash on? What proportion of that is on items subject to VAT?

well exactly. so why at the point of retirement say here you go, have 25% of the pot back without tax.

 

[dsr-burnley]

well exactly. so why at the point of retirement say here you go, have 25% of the pot back without tax.

The reason is to encourage people to save for their pension. It has long been believed in some quarters that giving people tax benefits to saving for a pension is a good thing because it reduces the need for government to support them in old age.

Alternatively, of course, this government seems to incline to the belief that the support in old age for some pensioners is going a bit far. They aren't just comfortable, they're in luxury; and luxury, we know, is a Bad Thing.

 

[Super Steve Earle]

The reason is to encourage people to save for their pension. It has long been believed in some quarters that giving people tax benefits to saving for a pension is a good thing because it reduces the need for government to support them in old age.

Alternatively, of course, this government seems to incline to the belief that the support in old age for some pensioners is going a bit far. They aren't just comfortable, they're in luxury; and luxury, we know, is a Bad Thing.

Must admit, I think this Government thinks comfortable is also a Bad Thing. The luxury ones will always enjoy luxury. But the comfortable ones will be forced to reduce their comforts. Not sure why this is beneficial to anybody.

 

[beorhthelm]

The reason is to encourage people to save for their pension. It has long been believed in some quarters that giving people tax benefits to saving for a pension is a good thing because it reduces the need for government to support them in old age.

Alternatively, of course, this government seems to incline to the belief that the support in old age for some pensioners is going a bit far. They aren't just comfortable, they're in luxury; and luxury, we know, is a Bad Thing.

this is talking about two things. tax relief for pensions is good. there is an expectation taxes will be paid in futur anyway, so make sense. a tax free pump sum breaks that logic. it's a 67k gift to those well off enough max out the tax free amount, which is an awful lot of pensions, which are already doing very well thank you on their pension savings. it's daft to give this group such a pay off and inconsistent with purposes.

 

[Super Steve Earle]

this is talking about two things. tax relief for pensions is good. there is an expectation taxes will be paid in futur anyway, so make sense. a tax free pump sum breaks that logic. it's a 67k gift to those well off enough max out the tax free amount, which is an awful lot of pensions, which are already doing very well thank you on their pension savings. it's daft to give this group such a pay off and inconsistent with purposes.

But what about those not well off enough to max it out, who might be relying on the tax free sum for whatever it is they were relying on it for?

 

[Bodian]

But what about those not well off enough to max it out, who might be relying on the tax free sum for whatever it is they were relying on it for?

They'll still be able to get £100,000 out tax-free.

 

[beorhthelm]

But what about those not well off enough to max it out, who might be relying on the tax free sum for whatever it is they were relying on it for?

they can rely on it after tax. a pension is supposed to see you through old age, it's peculiar that it's expected we get this one-off payment up front and without tax.

 

[timbha]

they can rely on it sans tax. a pension is supposed to see you through old age, it's peculiar that it's expected we get this one-off payment up front and without tax.

I’m late to the party on this so apologies if it’s been covered. Some people with modest wealth and income have made plans for the lump sum, eg paying off their mortgage at retirement. All part of sensible financial planning and to have the rules changed at such a late stage won’t give them time to mitigate any shortfall.

 

[Blue&WhiteSea]

Also, it doesn't have to be taken as a one off lump sum anymore, if you have a drawdown pension instead of an annuity you can get 25% of the regular withdrawals tax free up to the Lump Sum Allowance maximum, this is very helpful for keeping funds invested for as long as possible and helping the whole pot last longer.

 

[Is it PotG?]

14 years and £22bn.

 

[Giraffe]

I see new workers rights coming in today. Are employers going to be happy about possibility of having to agree to flexible working from day one.

I think most employers are pretty pragmatic about this now. If you want to get good employees or retain good employees they expect flexible working of some nature now. The employment market has driven this and therefore I don't think it needs legislating for.

 

[Giraffe]

I’m late to the party on this so apologies if it’s been covered. Some people with modest wealth and income have made plans for the lump sum, eg paying off their mortgage at retirement. All part of sensible financial planning and to have the rules changed at such a late stage won’t give them time to mitigate any shortfall.

I agree with this. Very harsh on those that have done the sensible thing and saved into their pension knowing what the rules are, only to have those rules changed at the point of their retirement. Suspect this will get tied up in legal challenges and may never happen.

 

[chip]

I agree. I think you meant to reply to the post to which I was responding.

It was late, I did!

 

[dsr-burnley]

they can rely on it after tax. a pension is supposed to see you through old age, it's peculiar that it's expected we get this one-off payment up front and without tax.

The point of the tax relief on all the payments in but the tax charge on only 75% of the payments out, is that it encourages people to save into their pensions. Remember that the capital gains and income that a pension pot earns you become taxable (well, 75% of them) when you take them out.

If you make all the pension withdrawals taxable, then so much of the benefit to having a pension is lost. If you put the money in an ISA instead, not only is it more flexible, but the gains and income are all tax free.

 

[Bodian]

This whole discussion on the lump sum issue may be possibly misplaced anyway. There doesn't seem to have actually been anything proposed or said by the Government at all. It seems to be an IFS recommendation that hasn't specifically been ruled out - and therefore now being portrayed by some of the media as 'likely'.