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Labour plans to slash pensions tax relief for richest

by Daniel Grote on Jan 04, 2013 at 07:41

Labour plans to slash pensions tax relief for richest

Labour is to unveil plans to cut pensions tax relief for top rate payers to just 20% to fund a compulsory job scheme for the long-term unemployed, according to the Financial Times.

The move would raise around £1 billion and hit those paying the 45p tax rate, leading to them facing an additional tax bill of £10,000 a year.

Shadow chancellor Ed Balls (pictured) will unveil the plans today, according to the FT. They are expected to fund a ‘jobs guarantee’ for those unemployed for more than two years, with the government paying the minimum wage and national insurance.

The jobs in the private or voluntary sector would last six months and are intended to help the unemployed find a permanent job. Those who refused to take part would face penalties.

19 comments so far. Why not have your say?

james Clancy via mobile

Jan 04, 2013 at 08:21

While many of our illustrious leaders are articulate and well educated. It is a good job they lack Common Sense otherwise they would be bloody dangerous

Another vote grabbing headline Ed.

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Richard Anderson

Jan 04, 2013 at 08:23

er, pardon my ignorance, but will it not be many of those same 45% taxpayers who will be expected to 'employ' these individuals?

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Derek Dryden

Jan 04, 2013 at 09:26

Will they? Really? I hope they have a lot of patience because I cant see them being in a position to do owt after the dogs dinner their party made of our economy.....all these great ideas they have about they would do this and they would do that.......do they really think UK folk are idiots??? If they have so many great suggestions on what to do and what not to do, it is a shame they didnt actually bother with their cunning plans in the 13 years they were in power. They really just need to sit quietly whilst the other 2 parties try to rectify their previous body of work..........time for a lie down now - they are all lying, two faced, point scoring numpties, we just has a different set of them in Government at the moment

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Richard Hardy

Jan 04, 2013 at 09:48

I notice there is no mention of starting with MP's pensions!

More balls from the mouth of Balls.

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The Other Side

Jan 04, 2013 at 09:51

Yes because that will work! All people will do is cut their funding into their pension (something I believe the government wants to encourage?!) and seek out other ways of investing or moving earnings to avoid the tax in the first place.

Keep hitting the top earners, when they get fed up they will leave the country, then who will they tax?!

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Man of Kent

Jan 04, 2013 at 09:58

@ Richard Anderson - I don't think Ed Balls has got any further with thinking about where or what the jobs would actually be than when he first floated this idea early last year. If you're engaged in sound-bite opposition where you can pretend to be driven by socialist altruism you only have to say "jobs".

These jobs are expected to last six months. Liam Byrne states today that Coalition plans to get people back to work are flawed because there are no jobs. What happens when these proposed State-funded 'jobs' expire?

I look forward to the 'details' with bated breath.

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Mr Man

Jan 04, 2013 at 10:37

This type of attack on pensions tax relief would not be needed if the correct amount of Corporation tax was collected in the first place. I suspect £billions over the last 20 years have been avoided by the big corporations. If the correct amount of tax was paid we could probably give a government funded job to all the current unemployed and look after the elderly for free as well. It seems that because the larger companies employ people and pay employer NI then they can "legally evade" Corporation Tax, hence the need for these other methods of raising funds.UK governments are ham strung by always wanting the UK to be seen to be "open for business" , which also means "hey come over here and rip our tax system off" .Crazy Crazy.

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Ian Watson

Jan 04, 2013 at 10:55

I confess I have not read Mr Balls' statement on his intentions.

However, relatively recent history of the old Soviet Union shows that state funded jobs CAN lead to, anecdotally, 4 guys watching 1 guy sweep the factory floor, on a weekly rota with the 4 watchers . . . .

What did that lead to . . . inefficiency, economic collapse followed by semi anarchy, corruption and Klondike capitalism . . ? Great !

I have no answer to the problems we face . . . I am just a mortal, but the older I get, the more I think that, worryingly, there is no ( good ) answer.

In general, our society overall has expectations above our ability to deliver in a world where a surplus in one country means a deficit somewhere else . . . or am I missing something ?

Our only hope, due to high wages and living costs, and a lack of natural resources, is that we can supply the newly rich foreigners with "high value added " goods and services where we still maintain a market lead . . . perhaps Aerospace, IT, Biochems, "status brands" and . . . financial services ?

This may eventually give us a sufficient surplus to look after those who cannot contribute to the "High value add" process, who we need to keep away from crime to support their expectations . . .

. . . . but what about the National Debt . . .? Ooops . . . now what ?

Answers on a postcard to Mr D Cameron . . . . .

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John Burchett

Jan 04, 2013 at 11:22

When will the Labour Party recogonise that their Robin Hood approach never has and never will work.

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j p

Jan 04, 2013 at 11:27

they keep using the stick on the higher paid, without thinking that many of these people run businesses and might respond better to a carrot. In the US they used to have a system where individuals did not receive tax relief unless their staff joined a plan.

Much better to introduce an incentive than this throwback to the seventies

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thomas west

Jan 04, 2013 at 11:27

I have to agree with Mr Man; I have just read about the criminal gangs who have been caught tax dodging in 2012 but they are criminals. Their tax dodges pale into insignificance when you read about the 'legitimate' tax loopholes that are exploited by large multinational corporations. If we could get that right then we would all be better off.

As to the pensions issue it is all smoke and mirrors; those wealthy clients will max their contributions to their pensions and then invest in ISA's,UTs,OEICS, Invesment Trusts, etc,etc. They are not stupid and neither are we; the main problem is getting 'ordinary' people to invest in their pension; try using the MAS website to forecast what you might receive as an income at retirement (based on todays money). It does not look worthwhile, in fact it makes investing in a pension look like a total waste of time and money.

Still it's not all doom and gloom, at least Hector Sants is up for a knighthood so everything is allright isn't it?

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Michael Brown

Jan 04, 2013 at 11:33

Research indicates that this is another re-invented statement from Balls AKA Brown era.

Balls announced this pension tax raid last year where the monies was to be used to put the Tax credit system back to where they left if before this GVT reduced it.

Another case of double counting from this Dick Head.

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Usually found sitting on the fence

Jan 04, 2013 at 12:30

A lot of criticism, but not a lot constructive. In isolation this may look like another swipe at taking from the rich, however the tax relief (in my opinion) should be the same for all monies contributed. I justify this in that all contributions should be given relief at 25% and it should all be paid into the pension pot. This additional 5% is a bonus to lower earners and still gives higher earners something. But, this needs to be balanced by a controlled alignment of all tax bands to create a two tier tax system of nil tax on earnings up to £12,000 (randomly chosen number, a more scientific value is needed) and then 35% tax on all other income (scrapping NI and to include all investment income/gains). A simplified system.

However, to get to the simplified system, and without creating violent animosity towards the rich, this would need to be a long term plan, spanning several Governments and would need inter-party cooperation. The rich would be required to sacrifice salary, so as not to artificially inflate their income after tax and the poor would need to have pay increase to maintain take home pay (where the increased nil band does not quite cover this).

The current tax/credits/benefit system encourages an ever widening pay range, and tweaking the tax system is not enough in itself.

Additionally, corporations need to be paying their fair share and be rewarded for paying their employees liveable wages. If an employer ensures all employees are self-sufficient and not claiming tax credits or other benefits to top up a poor wage, then that company should be rewarded. If the same company is ensuring that the top executives are not being rewarded disproportionately to their employees, then they should be rewarded. Where a company ignores the laws or the spirit of paying tax in the country they operate, then I am in favour of punishment, harsh sanctions and even in extreme cases banning them from trading, unfortunately to achieve this the rules need to be simple, clear and without ambiguity (but is that in the interest of well paid HMRC bosses and millionaire MPs?)

I could rant on and on, but I think I have said enough...

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DOH

Jan 04, 2013 at 12:41

How inept can these "leading" Labour possibly be?

They started the auto enrolment initiative which the coalition has continued,on the basis that pension saving was desirable for all. Now after further pension savings restrictions announced by the coalition this announcement.

Nether party has any real support for pension saving and they should come out and say it instead of kidding around that they do and incidentally costing themselves and companies a fortune in the process ( I refer to the auto enrolment farce).

It s becoming ever clearer that no one can trust long term pension saving as the rules will almost certainly be changed (by whatever government s in power at any given time) to the saver's disadvantage.

It is becoming the big political football of the age and it is a disgrace.

DOH

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Ian Watson

Jan 04, 2013 at 12:57

Usually found . . .

Great stuff and worth a thought, but any idea of how to define " fair share " ?

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Usually found sitting on the fence

Jan 04, 2013 at 14:30

@ Ian Watson - The idea is centred around making the taxation system more transparent and hopefully with that becomes a reasonable indication of what is a fair share. Of course, much of what I say cannot be supported as I do not have access to the underlying data, systems or time (and perhaps mathematical ability) to back this up with reasoned assumptions... But then, do the MPs do anything different than offer opinion, especially those in opposition, and then hope the facts can be manipulated to support the idea.

But, in the interest of continuing my opinion and giving ideas towards solutions. Fair share could equal 35% of profits generated within the UK, which means that businesses profit is equivalent to income tax. As a society we will implode if we do not move away from the culture of high profit and/or high turnover whatever the sacrifice... But I guess I am considered a borderline socialist, where I consider myself to be pro capitalism and anti exploitationism. It is the government's role to ensure that capitalism thrives without penalising the masses. Tory, LibDem, Labour, ConDem etc etc have all yet to be convincing that they understand the problem, therefore how can they be entrusted with the solution... Put me in charge for 20 years and I am sure I will mess up just as badly ;)

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Ian Watson

Jan 04, 2013 at 15:37

Sounds like as good place as any to start . . .

Good luck with the campaign !

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Julian Stevens

Jan 06, 2013 at 12:39

For what my opinion may be worth, it seems unjust that those subject to the highest rates of income tax, whose earnings generate the greatest amounts of NIC and who have the greatest spending power (with the knock-on effect of generating all sorts of other taxes) should be denied corresponding levels of relief on their pension contributions.

Then again, as Thomas West observes, locking away money into a pension plan has become such a poor value proposition that ever less people are inclined to do so anyway. For its part, the government remains resolutely deaf to all calls for an alternative to the annuity rates trap, it's reneged totally on its pre-election manifesto promise to simplify the pensions framework and the 55% rate of death tax on unspent funds post-vesting is another deterrent.

Apart from those whose employer is making a decent level of contributions in addition to their own, about the only people for whom contributions to a PP remain worthwhile are HRT payers doing it by way of Salary Sacrifice uplifted by an amount equivalent to the employer's savings in NIC.

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John Whipple

Jan 07, 2013 at 10:06

@UFSoF sounds like a call for fairness to me but the system is set up to be unfair by design. We of all people should be aware of this fact.

Designed to arouse and cause disharmany, inequality and argument and in that it works very well indeed.

@Thomas West same with the tax system as you rightly point out.

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