Lifetime Allowance penalties are one of the main reasons why the NHS has lost a lot of senior (and not so senior) doctors, surgeons, consultants and other senior staff in the last few years. The removal of the LA was designed to stop further losses in the NHS, lack of these staff is one of the main reasons the NHS is failing to provide the care it should.
Ironically Labour immediately coming out and saying that they will reintroduce the LA if (when) they win the next election is likely to lead to a massive outflux of the people the NHS is so dependent on, as they will want to take their pension benefits in the next 18 months with no Lifetime Allowance charge.
The Labour party, in all their wisdom, may well have just killed off the NHS. Still it won't have happened with them in power so it won't be their fault, will it?
Not an ideal post for the humour thread I'll admit!
Certainly agree that don't want to derail one of the best threads on here. But disagree with some of that.
Firstly, the myth that there was a previous tax rate of 55% on pensions over the £1 million + threshold. That is only true for the 25% "tax-free" optional cash from the pension-all other investment options are taxed at 25%. In addition, there will be a tax-free slice of over £250,000 on that lump sum.
The removal of the LA is not designed to stop further losses in the NHS. If that were the case, changes could have been made to the relevant NHS Pension schemes. Instead, it rewards all people who can afford to have a pension over £1 million. Which will include Bankers, Entrepreneurs and indeed Surgeons who choose to leave the NHS.
The starting point for tax has to be from each according to his ability, to each according to his need. Suppose a Surgeon earns £200,000 per annum. If that was all taken as Salary, take home pay would be roughly £115,000 p.a. The rest tax. That could be reduced by putting money into a pension, up to £1 million (end value, not contributions).
Under the new rules, there will be no limits. So-Surgeon can place all of his £200,000 p.a into his pension. And pay £0 tax. Similarly, a multi-billionaire can now pay himself into his pension.
The NHS is a priority. Not rich people. If a tax-free bonus of £1 million's worth of contributions, and a £250,000 tax-free allowance is not enough, (together with a large salary) then there is something wrong with the world
Unless you believe that the ordinary working man (including 99% of NHS workers) should pay the share of the super-rich.
No Phil, you are wrong. Tax Free Cash will still be limited to 25% of the currently LA, so £268,275. The LA charge on income is currently 25% IN ADDITION to the income tax charged, so in effect when you take anything over the lifetime allowance it is charged at, effectively, at least 55%. You can't really apply tax rules to just one occupation that would, quite rightly, result in uproar and probable legal challenges, from anyone else not getting such favourable treatment. They considered it a few years ago when it became apparent what was happening in the NHS. The annual allowance (the amount you can put into a pension each year) is being raised from £40,000 to £60,000 so a surgeon cannot put all of his salary into a pension, nor can anyone else, billionaire or not, without tax penalties that negate any advantage. Many NHS staff were going over the £40,000 annual limit and falling foul of AA penalties, less will exceed £60,000 per annum. The LA value for final salary pensions is calculated at 20x pension plus tax free cash, so currently anyone with an NHS pension entitlement of over about £46,656 per annum would probably be exceeding the LA. Anyone in the NHS with pension entitlement over that figure may well decide to retire early rather than wait for Labour to change the rules again. p.s. I am looking at this from the perspective of the NHS, not the super rich, the super rich, as we know tend to not reside in the UK and therefore pay very little tax, that's a different issue. p.p.s. I know a GP who was very senior a few years ago when the Government decided to change GP's pay calculations (and pay them based on the services they provided to their patients, rather than a 'salary'). He advised them against doing so as it would result in GPs being paid far more than they were at the time. They ignored him. He is now retired on a 6 figure per annum NHS pension.
Let's take those bit by bit. And then either agree, agree to disagree, or create a new thread (pretty sure option 3 will be unpopular!)
1. Replacement cap for tax-free cash. Fair enough. You are right. 2. The LA charge. Partially disagree. Leaving to 1 side that there are considerable zero rate bands for both tax-free lump sum and income, it is true, but a little misleading to say the excess is taxed at 55%. Because these extra sums have previously avoided a 40% tax rate when they went in to the pension, and cause the value of the Pension to be 40% (or 66%, depending on how you look at the payment) higher than it would have been if tax had been paid on the payments in). So it is only tax at 25% instead of 40% 3. Can you make exemptions for professions? Agree-probably not. However, could alter the NHS Pension Scheme Rules-although risk would still remain 4. One surprising thing is that Annuity Rates are still so low. About 4-4.5%, I think. So-as you rightly say-£1 million-odd may only pay an Annuity of £46k-odd. I say surprising because galloping inflation seems to have had little impact on Annuity Rates (unlike when inflation was falling). Annuity Rates mean that, for the Annuitant to get their pot back (never mind interest), they need to live to 90 5. Take your point about the £40k/60k. However, compare/contrast that 50% increase with increases offered to lower-paid staff. That is effectively an £8k per annum tax break. 6. I was focusing more on the people who receive high income, rather than the super-rich. They do tend to reside in the UK-but are allowed to not be called "resident" in the UK for tax purposes 7. Finally, final salary pensions have been removed for nearly everybody now-except for public sector workers. At some stage, a prudent Government should be offering Public Sector employees the option of a higher salary and lower pension benefits. But, like your suggestion, not holding my breath...
Last point, let's get rid of all final salary and career average salary pension schemes. This will mean that the average taxpayer will no longer be subsidising the NHS pension, Civil Service Pension, Teachers Pension, Police Pension, Fire Service Pension, MPs Pension Scheme etc etc. Much fairer on the average taxpayer, but will never happen obviously.
Two things?
1) As the person who started this thread? Take this outside chaps?!🤪 2) As someone who has a final salary pension from the public sector ( with a reasonable final salary..ahem) can't possibly agree 💩and as I'm due to receive my state pension in May this year, the only thing...I say the only thing I've ever agreed with these Tories is the commitment to keep the triple lock!👹
Last point, let's get rid of all final salary and career average salary pension schemes. This will mean that the average taxpayer will no longer be subsidising the NHS pension, Civil Service Pension, Teachers Pension, Police Pension, Fire Service Pension, MPs Pension Scheme etc etc. Much fairer on the average taxpayer, but will never happen obviously.
Two things?
1) As the person who started this thread? Take this outside chaps?!🤪 2) As someone who has a final salary pension from the public sector ( with a reasonable final salary..ahem) can't possibly agree 💩and as I'm due to receive my state pension in May this year, the only thing...I say the only thing I've ever agreed with these Tories is the commitment to keep the triple lock!👹
Last point, let's get rid of all final salary and career average salary pension schemes. This will mean that the average taxpayer will no longer be subsidising the NHS pension, Civil Service Pension, Teachers Pension, Police Pension, Fire Service Pension, MPs Pension Scheme etc etc. Much fairer on the average taxpayer, but will never happen obviously.
Two things?
1) As the person who started this thread? Take this outside chaps?!🤪 2) As someone who has a final salary pension from the public sector ( with a reasonable final salary..ahem) can't possibly agree 💩and as I'm due to receive my state pension in May this year, the only thing...I say the only thing I've ever agreed with these Tories is the commitment to keep the triple lock!👹
Comments
1. Replacement cap for tax-free cash. Fair enough. You are right.
2. The LA charge. Partially disagree. Leaving to 1 side that there are considerable zero rate bands for both tax-free lump sum and income, it is true, but a little misleading to say the excess is taxed at 55%. Because these extra sums have previously avoided a 40% tax rate when they went in to the pension, and cause the value of the Pension to be 40% (or 66%, depending on how you look at the payment) higher than it would have been if tax had been paid on the payments in). So it is only tax at 25% instead of 40%
3. Can you make exemptions for professions? Agree-probably not. However, could alter the NHS Pension Scheme Rules-although risk would still remain
4. One surprising thing is that Annuity Rates are still so low. About 4-4.5%, I think. So-as you rightly say-£1 million-odd may only pay an Annuity of £46k-odd. I say surprising because galloping inflation seems to have had little impact on Annuity Rates (unlike when inflation was falling). Annuity Rates mean that, for the Annuitant to get their pot back (never mind interest), they need to live to 90
5. Take your point about the £40k/60k. However, compare/contrast that 50% increase with increases offered to lower-paid staff. That is effectively an £8k per annum tax break.
6. I was focusing more on the people who receive high income, rather than the super-rich. They do tend to reside in the UK-but are allowed to not be called "resident" in the UK for tax purposes
7. Finally, final salary pensions have been removed for nearly everybody now-except for public sector workers. At some stage, a prudent Government should be offering Public Sector employees the option of a higher salary and lower pension benefits. But, like your suggestion, not holding my breath...
1) As the person who started this thread? Take this outside chaps?!🤪
2) As someone who has a final salary pension from the public sector ( with a reasonable final salary..ahem) can't possibly agree 💩and as I'm due to receive my state pension in May this year, the only thing...I say the only thing I've ever agreed with these Tories is the commitment to keep the triple lock!👹
Apologies to all.
#Labour Maths