Labours plans re taxing pensions

[Catlover1705]

Does anyone know what these plans are please? Planning to retire next year at 60 with a moderate Local Government monthly pension and lump sum under 100k.

The state pension is £1000 less than personal allowence, if you are only receiving state pension then it’s not over the allowence.

12,500 is a very paltry sum for a pension,but they tax it.

Just where do the whining younger generation get the idea about "gold plated pensions"? They're in for a surprise when they get to the retirement finish line.

Let 'em try existing on 1k a month!

There absolutely is because the state pension is so low and leaves pensioners often on the breadline

Yes I understood this.

There's increased poverty amongst all age groups, the freezing of the tax allowances has been brutal for people at the bottom.

The way the Conservatives have dealt with tax has increased the burden on the poorest.

@bergamotorange but those of working age may be able to increase their earnings (emphasis on may) someone above pension age is increasingly unlikely to be able to do so, especially as pension age increases therefore it's more significant if the state pension puts people on the breadline not least because the people you refer to as the poorest will probably be those who depend on the state pension the most

It's not a race to the bottom.

What has been done by freezing tax allowances has been deliberately done, and the poorest have got poorer as a result.

There is poverty in all age brackets.

Does anyone know what proportion of pensioners have only the state pension? It feels like the vast majority will have a private pension too so will already be paying income tax.

@bergamotorange

"It's not a race to the bottom.

What has been done by freezing tax allowances has been deliberately done, and the poorest have got poorer as a result.

There is poverty in all age brackets."

Old people are not a breed of their own, we will all get old. We all have relatives who are older. You are dismissing the financial concerns faced by older people (and those on low incomes approaching older age) who only have the state pension (and potentially very modest private pensions).

Those in poverty in other age brackets can potentially depending on health/caring responsibilities do more to improve their position than those of pension age and above.

Potentially because of ageism, health concerns etc it's going to be harder for someone in their 70s and 80s to continue to work even if people actually accept them.

Also, do you want those who are of working age now and in poverty to reach their pension years and potentially be in an even worse position?

Although people don't like to say it, not all of the older generation are rich 'boomers' sitting on millions of investment with huge pensions, certainly not my relatives.

However this is the age bracket most likely to be millionaires. Pensioners already pay less tax as they don't pay NI. I agree with PP re- introducing the lifetime allowance will be an own goal in terms of cutting waiting lists in the NHS. TBH parties of all hues are between a rock and a hard place on this one.

I'm not dismissing anyone's concerns. I'm saying that poverty has risen in all age groups in this country.

My point is exactly that Old people are not a breed of their own which is why the increased poverty rates we see across the country must be tackled in the round.

A few quid extra in pension is a weak gesture, older people are deeply affected by healthcare collapse, social care gaps, social services cuts etc.

Be mindful that you know nothing of my finances, my age, my relatives' situations - I don't need any lectures about the reality for many pensioners.

About 70% have some private pension, of course these vary hugely.

There is also pension credit and other support with e.g. housing costs for those with very low income.

@bergamotorange I believe pension credit is only open to those who have a weekly income of less than £218.15 (according to gov website) albeit if they do, they will have access to other benefits.

@bergamotorange for comparison the gov website says the 'full' state pension is £221.20 which means pensioners with only a state pension can't get pension credit I believe

I assume you mean the 40% tax rate (not relief).

Why should pensioners pay more tax so that high earners pay less? Pensioners already pay 20% tax if their pension is over the personal allowance, that applies to everyone, and 40% tax if their pensions take them over that earnings threshold the same as everyone else. Are you saying pensioners should pay additional tax compared to everyone else?

I assume the pp meant relief as stated. It’s not about tax when you take your pension, it’s about tax when you contribute to it.
At the moment you get back whatever tax you’d have otherwise paid on pension contributions. So if a higher rate tax payer puts what would have been after-tax earnings of £100 into their pension, they actually end up with £140 in there as they get it gross, before the tax was taken off. For a person who would have paid 20% tax it’s £120.

it has long been suggested that everyone could get 20% - so the first person would get £120 in their pension and pay £20 tax.

the idea on the current arrangement is that a) it encourages pension saving, and b) you’ll be taxed on your pension when you take it, so if you also pay some tax when you put the money in you are effectively taxed twice.

Yes those with very low incomes only. And worryingly many do not claim it!

Sorry, but you are utterly wrong. Many people on the pre 2016 pension are getting far more as SERPS and S2P can bring the pension up to over £300 a week, my father being one of them. Plus even on the post 2016 pension, many have an element of SERPS and S2P which can take them over the new maximum of £221 a week

Watching for responses to this - I can’t see it in any manifesto but it would seem to me an easy win for politicians

It is important that the state pension remains sustainable. Tying it to average earnings is the only way to keep it affordable. There needs to be a discussion on what level that should be, I believe it is currently about 25% of average earnings. Remember, the state pension was never intended to be sufficient on its own. Originally it was anticipated that people would have savings etc, more recently, that people would have private pensions. Since the government has phased out the earnings related portion of the state pension, a private pension has become more important.

pension income is already subject to income tax
most likely is they’ll equalise tax relief between lower and upper rate tax payers on tax contributions . That won’t affect you.

Reforming tax relief on pension contributions is an easy win for an incoming government. It is unjustifiable that two thirds of tax relief on pensions goes to the already well off.
https://www.taxresearch.org.uk/Blog/2023/09/06/ending-higher-rates-of-tax-relief-on-pension-contributions-would-raise-14-5-billion-in-tax-a-year/

But some of that is because people have better private pension provision than before

Labour had said they would bring back the pensions Lifetime Allowance - but now they say they won't.

Either way the Lifetime Allowance was over £1 million and sounds like your pension is worth less than £400k (if the 25% lump sum is under 100k) so you wouldn't have been affected either way by that particular point.

It would make taxation a nightmare. Not only that, it would have a similar effect as re-introducing the lifetime allowance as it would make higher earners withdraw their labour instead of funding pensions. Currently somebody earning over £100k in the bracket where the personal allowance is withdrawn can effectively get 60% tax relief. Reducing this benefit would making earning in this bracket significantly less worthwhile.