Labour rumoured to introduce flat 30% tax relief on pension contributions *edited by MNHQ

[NotA6FigureSalary]

Hi all,

I'm surprised no-one is talking about this more.

Rumour is Labour are going to give everyone, no matter their salary, a flat rate of 30% tax relief on pension contributions.

Currently basic rate taxpayers get 20% relief and higher rate taxpayers 40%. The idea that you are getting back the money that was taken off you in tax.

Presumably lower paid workers will have more incentive to save to a pension but that's not much use if they can't afford to!

And higher rate taxpayers will have less of an incentive to save to a pension so other forms of saving/investing look more attractive in comparison (ISA/buy to lets).

Anyone got any thoughts? Thanks

Who’s saying that?

People on Universal credit gets benefits paid according to net earnings after tax , NI and pension payments come out of their earnings so does this mean there will be no change for this group which must comprise a significant number of low earners. Sorry I'm not quite understanding how this change would affect people. I am a lowish earner but don't really have any choice on how much I pay into my pension scheme?

@Miley1967 people don't get a say on the mandatory employee/employer pension contributions but we are all being encouraged to make additional contributions, either to our employer scheme or to a private pension (SIPP) if we want to have a comfortable retirement.

What would 30% flat rate pension tax relief mean for YOUR retirement fund? | This is Money

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There has been a lot of rumours about pensions and the 30% has been mentioned on threads here amongst other things but I think at the moment it is all just rumours unless you have seen something published recently as I don't keep up with everything pension related that much but have an interest in what's happening as I am retired, this obviously wouldn't affect me though

As a lower earner it would be better for you as you would be getting 30% tax relief on what you put into your pension rather than 20%, the people getting less would be higher rate taxpayers (over £50k) who will also get 30% instead of 40 or 45%

I am a higher rate taxpayer - obviously I would be sorry to lose 10% but it's not really right is it that richer people get rewarded by higher tax breaks for saving into a pension? It would still be hard to beat a pension as an investment especially given employer contributions as well. Those of us who can afford to save for our retirement (whether into pensions or any other way, although there are lots of reasons not to go for BTL these days!) will continue to do so, and it would be a much bigger benefit to basic rate taxpayers.

I think this is tricky because it would mean double tax on some money - tax paid when this money is earned and then tax paid when you take the money out the pension later on.

That's going to be a struggle to justify I think.

I didn’t think tbis was going to happen as it’s very complicated for defined benefit and salary sacrifice

Some people who earn just over the higher rate tax get 40% tax relief but when they get their pension will not be paying 40% tax on it as pensions are generally lower than salaries.

The principle of pension contributions has always been that it comes out of your PRE-tax salary. I think this being changed would irk a lot of people.

Yes to a pp who said it's annoying to be taxed twice. You pay tax on your income and then tax on your pension. Tax relief on contribs was meant to mitigate this.

Money is double taxed all the time, when you pay VAT, fuel duty, vehicle excise duty etc, all money you have paid income tax on.

The title is disengenourous as there are no "rumours" that you speak of - just the usual thoughts on how Labour could save money in the next Budget.

Changing the rate of tax relief to a single flat rate is nothing new. The Pensions minister for the coalition government (Steve Webb) mooted this when he was on office......he now works for a Pensions Company.

FWIW I think if they do change the tax relief to just one rate it will either be 20%, or more likely 25%.

But these "rumours" are nothing new and happen at every Budget.