Salary sacrifice to be taxed

My god, it’s like teaching Swahili to chickens.
That £4000 tax relief, that would have otherwise gone in tax, instead goes into your pension, which is invested and compounds over the years. If you have any sense it will be invested in a globally diversified way and you will reap the benefits.
Then, you have 25% of that entire pot completely tax free.

Maybe it’s to help pay for the lift on the 2child benefit cap

If welfare is increasing even more it’s all got to come from somewhere unfortunately
Same old same old.

Agree.

It’s such nonsense isn’t it and won’t be means tested anyway
Labour has already confirmed this

I haven’t read all these posts but do you know what? I am sick of all this whinging. No one knows exactly what will be in this budget despite all the right wing rags stirring up as much hysteria as possible. I and my husband while not remotely wealthy as middle earners may well be in the firing line and he may need to put back his retirement. But you know what? Labour were voted in to change things because people were sick of the collapse of essential public services and the economy so stop whining when they are trying to do this against a horrendous back drop of global problems and 14 years of austerity. Yes they may get it wrong in which case you can vote them out in four years. I can more or less guarantee that the various replacements currently on offer will not do any better. Cut them some slack and let them at least try. Hopefully the poorest in our society will be protected and the rest of us need to reflect on why we think it is possible to make things better without any money!

And how stupid RR is - this tax is supposed to raise 2bn only, it's really nothing in greater scheme of things for the government, but for businesses and individuals it's significant and will further increase employers costs means less recruitment and higher unemployment.

I haven’t denied saving NI on salary sacrifice. You are making things up now.

So people with a pension over £35k lose the state pension, is that what you propose?
If so, what about people with income from other sources such as ISAs?
If someone has a pension of £30k but can bolster this by taking another £30k per year from an ISA, do they lose the state pension?

The proposal was to means test it. It wouldn’t be removed from anyone unless they had separate means exceeding the average UK full time salary of £37,500. If you will have a private pension of that size why on Earth do you think you should be able to claim hundreds of thousands of pounds in welfare?

Because to get pension of this size on DC using SWR I'd have to have about 950k in my pension pot. Assuming 45 years of working life I'd need to save over 20k annually (I'm removing inflation /investments growth/ pension charges to simplify my point).

To be able to save such amounts I need to be a higher earner which means I'm already taxed through the roof.

You're making the same mistake which RR does - you believe that just because people have something you can take it away from them and they will oblige. Doesn't work like this.

Negroany does not look idiotic. You have denied saving on NI through salary sacrifice but you have done if as you say your employer is deducting it on your payslip as salary sacrifice. Negroany said you couldn't be on salary sacrifice as you said you were not saving on NI.
It is you who looks idiotic.

The proposal was to means test it. It wouldn’t be removed from anyone unless they had separate means exceeding the average UK full time salary of £37,500. If you will have a private pension of that size why on Earth do you think you should be able to claim hundreds of thousands of pounds in welfare?

The are full articles about it in these newspapers and many others. People aren’t “speculating” just because you haven’t read them.

No, it isn’t. Employer contributions to defined benefit schemes are also exempt from National Insurance.

So they save 4k in tax today. They lose access to this money for a number of years. They pay charges to pension funds during this years.

When they start withdrawing pension they pay income tax on it. Most likely at a lower rate, e.g. 20% instead of 40%, but they don't get any state benefits in this case, unlike those on benefits.

Let's don't forget that pensions are invested in businesses - something RR is desperate to get more of.

I think it's not a bad deal for government at all.

The problem is that most people see that someone has more than them and want to take it away/redistribute, instead of taking into account behavioral impact of changes.

The employers Nic saving was to encourage employers to enter these schemes. My employer splits the benefit.

they reckon they’ll raise £2bn a year. That’s peanuts really. For the amounts they need they need to stop tinkering and adding complexity for relatively small amounts and bite the bullet and raise one of the big 3. A bit of reform to get rid of the cliff edges (which can be done tax neutrally) would be appreciated!

No you didn't.

Can you please explain how exactly you will compensate the loss of 325k to me personally to keep me incentivised to work and save?
as it is now, I'm taxed to the hilt, whatever I was planning to pass to my DC attracts 40% IHT (500k would only cover a modest flat in London), I'd have to self fund my old age care and now you take 325k of state pension from me. Unless really very rich, it's a huge impact.

Why would I work then? I'd better stop ASAP, reduce my hours, spend it all/gift to DC so to celebrate my 67th birthday with zilch?

What ‘pension taxation’? How is it going to reduce pensions?
Someone fortunate to earn enough to be able to sacrifice £10k into a pension, is SAVING nearly £4k in tax ! They are getting ALL that extra tax relief in their pension.
They would pay £160 extra NI for the privilege, that’s all.
I detest this Govt. but this isn’t a bad idea.

“Salary sacrifice means giving up part of your salary in return for a tax or National Insurance benefit. The benefit can be a pension contribution.”

That’s how a major pension provider describes it. Furthermore, my salary slip each month clearly states that my pension contribution is salary sacrifice.

Yes I do have a salary sacrifice scheme. That’s how my works pension is set up. Clearly states it on my salary slip each month.

I’m not sure what you are trying to achieve by your arguments but you are making yourself look idiotic.

Basically, you are talking about a company pension that is deducted at source by payroll.

That seems to be the distinction you are drawing between that and making your own payments (and reclaiming on a tax return).

But that is NOT what salary sacrifice means. It's a different type of scheme. It looks the same on the surface, but there is a different set up, different rules, more admin, and you save NI as well as tax, which you don't with a "normal" company pension.

I'm afraid, as I have been trying to tell you, you're talking about something totally different.

But - the good news is, if this change comes in, it won't affect you. Yay!

But also, ALL pensions relate to tax.

Salary sacrifice is the only type that also relates to NI.

You must have realised by now that you don't have a salary sacrifice scheme and you don't know what one is!

If your firm allows you to log into the portal and change your contribution % then it simply cannot be salary sacrifice. And, funnily enough, you have identified one if the reasons some firms prefer not to use it, because they want to offer this flexibility and not have the usual admin of people writing to make changes.

But that flexibility would fail the HMRC rules for salary sacrifice. The rules limit the reasons you can change "your" (it's not "your", with sal sac all contributions are employer contributions) contribution - they are limited to things like marriage, house move, child birth, bereavement. If you're doing that regularly you must have a pretty hectic life.

It's not even that much. It only kicks in after £2k has gone in. So, if you're working on the higher pay level NI which is 2%, then it's £160.

Of course, once it takes them below the higher NI rate, it's 8% though.

But, it's under half of schemes that use it. And not many people save more than £2k a year, etc.

Op, I agree. It's disgraceful.

When you say private healthcare - is this because you're worried NHS care is not good enough? I agree it's not..but shouldn't the government's aim be to improve the NHS so private healthcare isn't the go-to option? Pipe dream at the moment, though..

I think Labor understood that they are a one term government and won't be back for decades to come (I hope not in my lifetime anyway) so they are trying to get money now stealing from future generations.

This pension taxation will reduce pension pots of those who are younger now and thus making more people state dependent in old age.

And to add, the person that I originally responded to was trying to argue that salary sacrifice was a TAX dodge. Which I why I responded that the tax position was the same under both. It didn’t change the rules on the taxation of pension contributions, but it did make it simpler to claim.