Pension Tax Free Allowance

Rasczak

Unsurprisingly, the decision in recent years to slash the annual Pension tax free allowance to just £40,000 has come home to roost:
NHS waiting lists surge due to pensions row

NHS operations cancelled as consultants work to rule in pensions standoff

Perhaps now is the time to review whether having the threshold so low - and thus impacting upon many middle earners - needs to be reviewed.  It seems absurd that successive Governments say they want people to save for later life and then impose punitive taxes when they do!

domtheone

Agreed that the government looking to punish those that are putting it away for later on in life, is totally the wrong kind of message they should be sending.  Especially as they are desperate, yup desperate for people overall, to save more.

Is the £40K for the employee contribution alone or both (combined with the employer amount).

I should know the answer really but those sort of numbers are generally for very very well paid peeps (hence Doctors) that I have less of an interest in.

Bl4ckGryph0n

So that is £40K pre-tax you can put in your pension pot each year and thus will get tax benefits. That is besides other kind of savings and investments you can do.

Blimey I'm normally the one advocating lower taxation, but that is a lot of cash as it is already. Seems reasonable to me.

PS. It is combined
PPS. It is not punitive in my opinion, it is just not as much tax efficient above the thresholds. However if you can spare more than £40K per annum I'm sure you can find other ways to remain competitive as well.

Rasczak

The £40,000 includes both employee and employer contributions.

IronGiant

I may have misheard it but I was sure that they said on the news at lunchtime that Consultants overtime didn't count towards their pension contributions, so I was wondering what they were complaining about.    Can anyone shed any light on that?

Bl4ckGryph0n

That would make more sense to me. To complain about that is.

I mean £110K and putting away more than £40K each year seems unlikely unless they have some other income stream as well...

domtheone

Perhaps the government should be looking to cap the contributions to it makes to well paid PS employees then.

If said well paid employees want to chuck loads in, they should be allowed.  So raise the £40K higher for individual contributions.

The tax relief bands might want to be looked at though (which I believe they have now and again) since it so favours the higher rate taxpayers.

Rasczak

Such as buying additional properties for renting out...

...which is course the Government is targeting as well.

They will be on a public sector scheme so I don't think that is unlikely.​

Bl4ckGryph0n

I'm ok with that, the housing market in the UK is silly. Owner/Occupiers is fine, but anything beyond that is purely for profit anyway. Should be discouraged and hopefully prices will come down a bit.

​So it isn't their cash, it is ours Unless I misunderstand the point....More than £40K on a £110K  salary seems overly generous in my opinion.

But perhaps the threshold should be linked to actual salary being received and thus have it flexible depending on actual income being generated...

ChuckMountain

The previous assumptions are assuming a defined contribution (cash purchase) pension rather than a final salary scheme.

On a final salary pension scheme it becomes more complicated.  A small pay rise can generate the equivalent of an increase of 40k in pension input.  Plus you then have additional voluntary contributions (avc) which means on some cases you can paying normal pension contribution rates and get stung for tax on the additional amount.

As the pension input doesn't get worked out straight away you can get a unexpected tax bill later that year.

To add the more they earn above £110k then the £40k pension also starts to reduce.  i.e no tax relief on pension