Monday, 3 December 2012

Shroud Waving Of The Day

From City AM:

ANY move in the Autumn Statement to cut tax relief on pensions contributions or tax the lump sum paid on retirement could hurt savers on modest incomes and put younger workers off saving altogether, pensions analysts warned yesterday.

The allowance eligible for relief used to rise with inflation, hitting £255,000 in 2010-11. But that was slashed to £50,000 for last year, and could be chopped again to £25,000 in the Statement on Wednesday.


How many people on "modest incomes" have £25,000 spare cash every year to squirrel away into their pension funds, let alone £50,000? Isn't the average-median-typical-whatever full time wage something in the order of £25,000 a year?

Or look at this way: let's assume that the annual upper limit were something sensible like £10,000* and the Tories increased it to £25,000 and adjusted the income tax rate upwards by a couple of per cent to keep revenues the same**. Would there not be some sort of outcry about the hit on people on "modest incomes"?

* The total value of the pool of things in which pension funds can invest (shares, bonds, commercial land and buildings etc) is limited, and it is mathematically impossible for all UK earners to pay in more than about £5,000 a year each without simply driving up the price of said possible investments and/or seeing all the tax breaks being siphoned off by the pension/insurance companies. I did the workings on this once, but I can't track them down right now.

** My preference is to reduce taxes on income across the board, that way people aren't being bludgeoned into joining the pension ponzi pyramid scheme in the first place, everybody wins.


Lola said...

OOOoowwwwww, fecking 'ell - aaaaarrrrgggghhhhh.

James Higham said...

How many people on "modest incomes" have £25,000 spare cash every year to squirrel away into their pension funds, let alone £50,000?

Try £5000.

Lola said...

FWIW if you can squirrel away about 15% of your gross income over a working life of about 40 to 45 years, and assuming that you invest into asset classes that defend you from inflation and get a little growth too, by about age 65 you will have enough capital to pay you an income of about 50% of your final working income.

I mean, how hard can it be?