SIPPs and tax relief.

[Tensai]

If one of the primary ways out of this recession is for people to start spending again, then logically the government will pretty soon start disincentivising people to stash their cash in the bank by reducing tax breaks.

Discuss/ridicule/abuse (delete as appropriate.)

[Cyberman]

This is not impossible: in some countries (e.g. France that I know about) you either have a status of "Retired" or you do not: if you are Retired you can't work, and if you are not Retired then you can't get the tax breaks yet.

France have many stupid rules to try to protect jobs and thus for instance introduced a 35 hour working week in 1997.
It does not make sense to stop people working when you have a demographic shortage of workers looming. Just because somebody is drawing a pension does not mean that that pension will be enough to sustain them, especially in the UK, and they may well need to earn additional income over time. In addition, pensioners would probably be paying extra into the exchequer which any HMG should welcome.

[expat]

Pensions are taxed when they are paid out from age 55 onwards when you draw them. Thus there is no logic in taxing the contributions, so I see this as pure scaremongering.

There is a logic: many of us could expect the pansion payouts to be taxed at only 20%, where the contributions attract 40% relief. That indeed is the big attraction for me. Most working people will not get that: the average person will get 20% relief on contributions and 20% tax on payouts, I get 40% relief and 20% tax on payouts.

I can quite see why politicians would call that "unfair". I don't like the logic, but I do see it.

[Fred Bloggs]

It's virtually guaranteed that the relief will be limited to basic rate tax, I blieve, very soon.

I also foresee legislation being made against "immediate vesting pension contributions"*** that are being pushed by the likes of Hargreaves Lansdown to those who are over 50 (55 after 2010) as a way of sort of having your cake and eating it too. I can see why the great unwashed would view them as being "unfair".

*** HL (and others) websites.

[Cyberman]

There is a logic: many of us could expect the pansion payouts to be taxed at only 20%, where the contributions attract 40% relief. That indeed is the big attraction for me. Most working people will not get that: the average person will get 20% relief on contributions and 20% tax on payouts, I get 40% relief and 20% tax on payouts.

I can quite see why politicians would call that "unfair". I don't like the logic, but I do see it.

.. but if you tax contributions on money-purchase schemes you reduce the potential growth enormously, just as Brown did since 1997 with his dividend tax-credits stealth tax.
Thus you further diminish the benefits of a pension at a time when they are poo anyway and people will eschew them and simply rely on the state at age 65. HMG then loses potential tax benefits from an ageing population and will put even more burdens on the workers of the future.
That is crazy, but I would not put it past a short-sighted socialist HMG which is only concerned about filling a black hole that is burgeoning daily.



It is just so stupid and there IS NO LOGIC so I just have to laugh !!

[expat]

It's virtually guaranteed that the relief will be limited to basic rate tax, I blieve, very soon.

I also foresee legislation being made against "immediate vesting pension contributions"*** that are being pushed by the likes of Hargreaves Lansdown to those who are over 50 (55 after 2010) as a way of sort of having your cake and eating it too. I can see why the great unwashed would view them as being "unfair".

*** HL (and others) websites.

I'd guess that too. But if they wipe the possibility of deferring tax until my rate is lower, and mess with the 25% lump sum, I don't think I'll bother.

[mrdonuts]

i thought it had been established that you can include a sipp pension payment as part of your salary , with upper limit of £225000 per year and that £10k cash £70k sipp was fine

[mrdonuts]

can anyone confirm that taking the majority of your remuneration via a sipp is fine?

[Gonzo]

can anyone confirm that taking the majority of your remuneration via a sipp is fine?

In "General" ? Are you having a laugh? Try the legal and accounting forum but expect a flaming because this has been covered before and the rules haven't changed recently.





You can't put the majority of your earnings into a pension because there is a contribution limit of £225,000 per year.


threaded

[MrC]

A year on since this thread was last active and with another budget looming I'd be interested to hear up to date opinions to the questions posted by the OP:

I know some people here are actively using the fact that this is a huge legit IR35-safe tax break. I want to ask for a couple of predictions:

1. Will the next Budget remove Higher Rate Tax Relief for individual contributions to a SIPP?

2. Will a similar hit be applied to Company contributions too?

My guesses are:
1. Yes.
2. Not yet. They'll spot it later and come back in the Autumn for that.