Salary sacrifice to be taxed

[SomethingInTheAirToday]

https://x.com/politlcsuk/status/1986914552093745592?s=46

not only are my generation not going to have a state pension or private healthcare, but we also can’t save into our own pensions because we need to fund the current generation.

this makes me so angry

That’s not what the FT is saying.

https://www.ft.com/content/556ba05c-6a30-4d8c-834d-7125856215e4

Agree
Labour need to put forward the recommendations and findings of the Conservatives white paper again
I wouldn’t be surprised if tax rises are introduced in this budget
there will be such an outcry that getting PIP reassessed will be easier

Yep apparently we’re supposed to be happy to fund them because teachers are stressed or some such.

Why don't they close tax loopholes, wouldn't that make the most for the country? Get rid of those with offshore accounts that don't benefit us.

I can’t read that because it’s paywalled, but my paper copy of The Times has a worked example consistent with my understanding. Removing income tax relief on pension contributions above 2k would save far more than is being touted, and realistically would remove the incentive for most people to save for a pension, which is a key policy objective of all governments to make people less reliant on the state pension.

PS I have many years experience in the pensions industry so do have a bit of relevant background.)

There seems to be a lot of confusion on this thread about what salary sacrifice actually is. To be clear - at the moment when you or your employer make contributions to any qualifying pension scheme, they get tax relief (for you or your employer). What happens with salary sacrifice is that instead of you paying contributions into the scheme you “sacrifice” some of your salary and the employer makes a pension contribution instead. Since your salary is lower, NI contributions are lower.

There has been a fair bit of speculation that this sort of salary sacrifice arrangement might be targeted in the budget. Not sure how they could actually do this though. And, as previous posters have said, it’s the NI savings that would be removed only.

Especially for basic rate tax payers, there is no suggestion that the current tax relief on pensions contributions is going to be taken away. There is always speculation that higher rate tax relief might go, and very high earners already have their pension tax relief limited to £10k per year.

I get bored of the comments about the tax payer funded state pension
i have worked in both the private and public sectors
wages in the public sector are lower, the pension benefit is higher. You can’t flip one without the other. It doesn’t matter who pays the bill it’s basic supply and demand
Those who whine that tax payers foot the bill would also whine if the public sector workers couldn’t be recruited as the remuneration ( including pension) wasn’t good enough
get a grip or do the job yourself

So, @SomethingInTheAirToday , people do overpay into pensions to avoid paying tax.

Yawn. Spot the person who doesn’t understand basic economics

It’s got nothing to do with the doctors’ pension protest. You try again.

Is this people earning over 50K who want to put funds towards their pension to avoid paying taxes on that extra money?

I think that is awful that as soon as you earn a half way decent salary teh government want to take half of it. 50 K is hardly rich is it?

Do you have a salary sacrifice scheme then? Most people don't. I don't and didn't with my last two employers either.

No. It's not that at all.

From The Times:

Salary sacrifice arrangements, as The Times reported on Friday, could be capped to pension contributions of a maximum of £2,000 a year.

Consistent with the government’s confused logic of what constitutes a “working person”, this is most likely to affect those on medium to higher salaries. Someone on a salary of £30,000 a year is unlikely to be able to put £2,000 of their own money into a pension every year. By contrast, someone on £100,000 is much more likely to be able to sacrifice £2,000 or more to put into their pension.

Most likely, it is going to hit pension saving. With the removal of the incentive to defer consumption, people are more likely to favour taking the money in their pay packet now. Up and down the country, millions of workers struggling with the cost of living are also trying to put money aside for their retirement. By any measure, this news is going to make their lives worse.

Can you take a picture of the worked example in your paper copy?

Someone knows what it is all about, thank god!

I definitely don't think it will make much money for the govt.

From The Times:

The one exception to this bad news on pension saving, as is so often the case with this government, is the public sector.

Public sector employees enjoy generous defined benefits schemes, where the bulk of the costs are borne by their employer. Typical employer contribution rates are about 25 per cent of pay, compared with about 6 per cent in the private sector.

Generally, public sector schemes only use salary sacrifice for additional voluntary contributions, where the contributions are optional and tend to be much lower and therefore less likely to breach the proposed £2,000 ceiling.

This is Labour robbing the private sector to pay the public sector. Disgusting.

Double post, iPhones are awful.

Yes, sure.

But if even one person wanted to opt out, the employer has to enable that. So they have to have a "normal" scheme running as well, for auto enrolment reasons.

Obviously you work in a white collar position. Where I work, we have around 3,000 staff, of whom well over 2,500 are on minimum wage. And that's not that unusual. So if I did introduce sal sac it would be for management only.

One place I worked I capped sal sac at 25% of salary. You could pay more in, but it would not be a sal sac contribution. The reason for this was because before I joined someone had sal sac'd 80% of their salary for two months then gone on mat leave and the employer had to keep up those contributions for the whole year. Because that's the impact of salary sacrifice.

I have no idea who has pip easily but my son is severely autistic , in his 20s non verbal needs help with everything , has no notion of danger can’t leave the house unattended even to go to the car etc . His application for pip was extremely hard , he had a in person interview , because I said he could open a yogurt pot they lied and said he could cook for himself , as an example of the lies c there where many . It was a massive stress and far from easy . Who are all this people getting high rate mobility this easily ?

Employer contributions became mandatory in 2018 for all people.
That is not an assumption, that is a fact
Today however prople who work do so with the full knowledge that they will have some sort of private pension also funded by their employer
There is no denying the fact that this is a huge benefit to future generations in their retirement years

Precisely. It won’t be employers that pay for the element that will be charged to them: employees will pay for it as always, via lower salary rises, reduction in any employer pension contributions above the legal minimum level, and lower hiring by businesses so fewer jobs being available.

I’m not taking about the law, I’m taking about your assumptions about @LBFseBrom ‘s pension.

It’s an indisputable fact that many boomers had better pensions, which are not feasible for much of today’s workforce.

Also if they are going to apply NI to pension contributions via salary sacrifice then they’d damn well better also apply them to the employee contributions into the public sector DB schemes as well and hit all the doctors, nurses and teachers with the same tax charge as everyone else.

Salary sacrifice for income tax is deferring tax (differences in earnings pre and post retirement often mean that the individual does legitimately avoid some income tax if they csn use it to slip back under a threshold). However you don't pay NI once over state retirement age do this bit of taxation gets avoided entirely.

Personally I'd prefer that they merge NI into income tax to close a few loopholes.

How much are you paying into your occupational pension?

Yep, but they won’t.

Who is there to even vote for anymore. Labour protect the non-working, Tories protect the rich and reform protect the racists.