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politicalbetting.com » Blog Archive » How George Osborne is hoping to raid pension pots without you noticing
When I qualified as a pension lawyer, my first boss used to say:
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And even if we didn't wish to abandon nuclear weapons, there are surely better options than a £100 billion off the shelf pig in a poke that not a single other nation on earth has decided to stump up for. The whole world is having collective diarrhoea over North Korea's nuclear arsenal, that seems to be working ok as a deterrent, are we, the world's second biggest arms exporter, not able to do better than North Korea? Can we not come up with something cheap, cheerful, efficient, and home-grown?
richardDodd said:
MG As usual you make the wrong assumptions..You are the one who is always referring to so called Vulture companies..and pour scorn upon them.. yet you happily work for one..I personally don't give a shit how the companies I work for make their money as long as they pay my exorbitant invoices on time..and keep on employing lots of people.
You absolute balloon, I have never ever mentioned "vulture companies" in my life. I have mentioned public servants and politicians being similar but never any companies.
Is it ever?
This sort of thing really is a good idea, politically, for governments, as like many people even when it is explained to me I struggle to understand just how significant these things can be, or I understand it, but intellectually and emotionally it doesn't sink in like it perhaps should.
'Never leave a Chancellor of the Exchequer with a deficit to plug alone with your money. He may be about to commit grand larceny.'
That seems very restrained and imprecise. Let's fix it:
'Never leave a Chancellor of the Exchequer with a deficit to plug alone with your money. He is definitely looking to commit grand larceny.'
Thank you, Alistair. I am just off to find that information on my pension changes that I received before Christmas, in the sudden realisation that I might be affected.
Looking at the notes, it makes sense. The list is ordered according to the city's network connectedness to the global economy. Hence regional cities in countries with a dominant global city (such as Bristol and Birmingham in relation to London in the UK), will appear lower down the list than small capital cities - particularly those like Nicosia and Dubai, with reasonably developed financial sectors.
Thanks, Osborne.
I have another smaller-scale one which I could sell to George Osborne on a commission basis. (It would be popular with business even as it extracted more money from them.)
As someone who is self employed I am resigned to the fact that I will never have a healthy retirement. If I am healthy I will still have to work. If I am not healthy I will have to stop but will be very poor. At the moment friends of ours are looking at taking the inevitable "packages" to retire early from public sector jobs in their early 60s/late 50s. I will (hopefully) be working into my 70s to pay for that.
When I hear junior Doctors (to pick a topical example) complaining about their pay their pension entitlements (which will make all of them millionaires before they retire) are rarely mentioned. The self employed and the defined contribution pension holders have far, far more to moan about than "voluntary" taxes incurred if a particular path is good for them.
This is the main reason I fail to see how this can work in an orderly manner.
That might just be good news for those of us lower down the career ladder - lots of vacancies to aim at. Even though I will probably still be explaining the emancipation of the Russian serfs in 1861 when I am 85 in order to pay for it (as I am in a similar boat to @Luckyguy1983)
Equity Release itself will become and more and more necessary part of retirement planning while pensions fail to deliver a fraction of the Boomers' Final Salary bonanzas on top of being the main beneficiaries of the doomed State Pension Ponzi Scheme.
Most of Gen X got on the housing ladder, so while they will lack a pension they will benefit from the inheritance and their own property. but Gen Y will have no pension, lower ownership chances and a very high likelihood that Gen X will be heavily into Equity Release when they see the reality of their pensions.
Currently you can take 25% of your money with no tax and you paid no tax when it went in. It would be a huge impact for me if the tax free sum was dropped.
The proposed changes seem on a par with Brown's changes to reporting of corporate pension funds in 1997, which seemed almost innocuous at the time but within a few short years had led to almost every private-sector defined-benefit scheme shutting down.
The current rules are designed to encourage saving in a pension, as you say most will contribute with 40% relief yet pay only 20% tax on the income (if that, as the personal allowance keeps rising). If that incentive was removed then surely less would be saved as it would be taxable. This would be a time bomb a few decades down the line with more people forced to rely on the State pension.
A final comment, to everyone in the UK feel lucky that the pensions industry is so well regulated. A little recent research of international schemes is full of front-loaded charges, minimum monthly payments fixed or escalating for decades, annual fund management fees, early redemption fees and other such practices which have been all but eliminated in the UK but are still very common elsewhere.
That brings its own problems - as we are critically short of headteachers in particular. Of course, it would open opportunities to ambitious teachers further down the ladder - but the cost in terms of damage to the education system might be a high one.
Are there any other organisations that might be in the same boat?
But it also comes back to the quite inexplicable choices the Tories are making not to invest in significant Social Housing development. They know, it is clear, that the only effective way to significantly increase Home Ownership is by giving away Social Housing stock.
The rest of it is sticking plasters, The ISA's the schemes, none of this will be significant. If the Tories want to secure their long term future they need to build, build, build and in the Socialist pattern of building Social Housing then giving it away.
My suggestion is that this is phased in now so that anyone will more than 14 years to retirement has to work an extra year for each 2 years of service until their pension becomes payable. For those in that window perhaps a lower ratio of additional time could be added. The savings would be substantial and the costs of the pensions brought more in line with what the contributions of the staff actually buy.
I will be very surprised if it is not 73 by the time we get to 2050 though, which is the same as the private pension my father very generously bought me 15 years ago. Equally, I would be surprised if it went higher than that.
Cruz 28%
Trump 24%
Rubio 13%
Carson 11%
Paul 5%
Bush 4%
Democrats
Clinton 48%
Sanders 45%
New Hampshire
GOP
Trump 30%
Rubio 14%
Christie 12%
Cruz 10%
Bush 9%
Kasich 9%
Democrats
Clinton 46%
Sanders 50%
http://maristpoll.marist.edu/110-cruz-and-trump-vie-in-ia-trump-nh-favorite-clinton-and-sanders-competitive/
Countries that have (and will replace one day with like-for-like) submarine-based nuclear deterrent:
US
Russia
India
China
France
UK
More would if they could afford it. (Or, in the case of Germany & Japan, were allowed to.)
As for home-grown... other than the missile, everything is British. The submarines, the warhead, the satellites, the submariners, the home port, the refueling facility, etc.
This believe it or not IS the cheapest *effective* method of nuclear deterrent. The only cheaper option is not to have one at all.
Regarding "hiding under Uncle Sam's nuclear umbrella" - yes, we could. Until the US chooses not to protect Europe, especially when it decides that it's not worth protecting/it isn't doing enough to protect itself/isn't contributing enough to the overall alliance.
The reality is that the US Navy has beaten the ArmsIndustrialSpendaholics in the Congress this time. The replacement will be Trident III - bit more range, bit more throw weight. The subs will be pretty similar.
The anger that they aren't going to get trillions to squander on an "improved system" has the porkonauts screaming treason.
So we are looking at system that will average £1 billion a year.
BAe couldn't do the paperwork for a big for that.
Mind you, I do have a cheaper option. Buy Jericho III from Israel and land base them. In Poland...... I think the Corybnites might achieve self sustaining fusion if we did that.
I wonder how much cross-party support Osborne will receive? I can see it appealing to Labour.
Your pension scheme is probably not as good as the one he had though.
I was very fortunate to have 30 years in a final salary scheme before it was scrapped and since then have had an enhanced amount each year on salary as compensation.
Lucky for me as I have spent every penny I have made over the years as well as made bad investments.
£100 billion over 40 years is £2.5bn per year.
Our defence budget is £45bn per year. Government spending totals £750bn a year. Our GDP is around £2 trillion.
It's actually incredibly cheap considering that it guarantees our security against the great powers. For a thousandth of our economic output we can guarantee it on an on-going basis against other nuclear powers.
I would imagine that it is cheaper than the dreadnought race v. Germany et al. circa 1910.
Clinton v Rubio: Rubio 3% ahead
Clinton v Cruz: Cruz 1.8% ahead
Clinton v Trump: Clinton 2% ahead
http://www.realclearpolitics.com/
Clare Short on Jeremy Corbyn: "He's making serious mistakes. He needs to have people from all traditions uniting and working together."
And three are in the Shadow Cabinet. Falconer, Murray and Powell.
Clinton 48% Trump 40%
Clinton 43% Cruz 47%
Clinton 42% Rubio 47%
Sanders 51% Trump 38%
Sanders 47% Cruz 42%
Sanders 44% Rubio 44%
New Hampshire General Election
Clinton 45% Trump 44%
Clinton 44% Cruz 48%
Clinton 40% Rubio 52%
Sanders 56% Trump 37%
Sanders 55% Cruz 36%
Sanders 50% Rubio 41%
http://maristpoll.marist.edu/110-cruz-and-trump-vie-in-ia-trump-nh-favorite-clinton-and-sanders-competitive/
So many demands, so little justification
My view is that, as every military strategist will agree, future conflicts are always unforeseen ones. It is not out of the realms of the possible for any number of scenarios to arise which would require or benefit from our ownership of a nuclear capability.
As to which flavour of deterrent, I'm sure no one really cares.
As prospect of tube strike appears again, here's a handy reminder of what they turned their noses up at last time https://t.co/DbkwmbsU20
The 50+ generation also increasingly own outright. That not only throws up increased capital, but also increases disposable income which often gets used to help both children and grandchildren.
Many pensions and annuities appear to be counter-productive in their relationship with the welfare system. Many find that every penny they gain from them gets taken away by the state if the promised income is far from substantial. So, why have a pension or annuity?
Home owners currently sit on vast numbers of unoccupied rooms so with the progression of time these can be used to help family or, if required, used to generate income.
From an electoral point of view, younger voters will probably have enough sense not to jeopardise their inheritances.
https://www.change.org/p/queen-elizabeth-why-wait-until-2020-get-cameron-out-now?recruiter=82757280&utm_source=share_petition&utm_medium=email&utm_campaign=share_email_responsive
With the majority of people not wanting a conservative government, the very much apparent nationwide dislike of PM David Cameron and the huge excitement surrounding honest, open politics that has been seen recently in things like Prime Ministers Questions, Why wait until 2020 to make a change?
This country is being abused by lies from the current Conservative Government.
Child poverty has dropped, but only because the threshold considered child poverty has been moved.
RBS Bank bailed out with public money was sold back at a 1 billion pound loss.
Food banks increasing, NHS Staff stuggling, Emergency services retirement age increasing... the list goes on and on.
This is not a government that the people want, This is not a government that the people voted in majority for and This is a government that we have no confidence in.
We (the signed) Call upon her majesty the Queen to announce on behalf of your people, a vote of no confidence in the current government and that this government must be dissolved.
I particularly like the bit about 'huge excitement' surrounding honest, open politics seem in recent PMQs, and how apparently that alone makes it clear the election just a few months earlier (which goes unmentioned) should just be set aside. Oh, and that it is a petition to the Queen.
I picked up on a post from the last thread that Danczuk was paid £5k by a national paper to talk about the tèxt messages he sent to a 17 year old. On every level I find this extraordinary, the standard of people we have in public life is dreadful, yet people continue to vote for them.
I don't expect politicians to live like monks but for crying out loud look at this man's back story, this phucking idiot passes laws.
You know at the start when he says "You're not going to get a rant", that it's going to be a ten minute rant.
The argument, as I understand it, is that our possession of a nuclear deterrent might deter a psychopath if he believed we also had a psychopath in charge who would retaliate. So a key component of our nuclear deterrence startegy is to have an apparent psychopath in charge (as long as they don't actually have access to the button!). That is why all PMs and aspiring PMs have to claim that they would fire the thing - i.e. claim they are psychopaths.
I think a much more compelling deterrent is a convincing claim and capability to kill ANYONE who actually fires a nuclear weapon in anger. Perhaps include their family - perhaps not.
Far better, and probably much cheaper, to make it personal rather than holding millions of civilians hostage. We are using this strategy against ISIS by successfully picking off their leadership. The Israelis used it in Iran to pick off eminent nuclear scientists.
Nuclear deterrence only works against states. Making it personal works against non-state actors as well.
The move from tax at drawing stage to tax at contributions stage is, effectively, the unravelling of a somewhat complex tax incentive to provide for one's retirement. I say somewhat complex: more so for the tax treatment of higher earners.
The idea of making certain payments out of gross rather than net pay is if anything, growing under "salary sacrifice" type schemes with the cognisance, if not encouragement, of HMRC. My overall view here is that individually such schemes look like simple and effective incentives, put taken together they are a set of trees, and no forest. Little links childcare vouchers to the government cycle scheme. All were based on the pensions model; taking the central plank out would throw the others into question.
The other point is whether we could properly incentivise pensions savings without gross/net trick. The ISA model (i.e. avoiding tax on pension savings earnings) is a good start - but does it go far enough? What about for people in different tax positions (I suspect higher earners are disproportionately going to save regardless of tax incentives - but I don't know)? What else does the government have in its arsenal?
http://www.telegraph.co.uk/news/worldnews/europe/germany/12091489/German-asylum-seeker-shelter-which-housed-Paris-police-station-attacker-raided.html
Pensions sound good, and they are, preparing for your own retiament is a sensible rational thing to do, but by providing an expensive, approx. 50 billion a year, and this benefit comes messily to the better off, 70% of the benefit goose to the 20% wealthiest, another 20% goes to the next 30% well off and only the last 10% goes to the 50% least well off in the contrary.
Because of this, we have a system that looks progressive, but is actually just complexes, and arguable overall regressive, and that is defiantly wrong.
This distortion incentivises lots of intelligent people to work as pension advisees, and tax accountants, moving wealth around to avoid tax, when the same people would otherwise be employed creating new wealth by making goods and services that we actually wanted.
While saving in a pension may be a good thing for most people for at least some of the time, it is not necessarily a good thing for all people all of the time. for somebody with a 500% pay day lone, it would be much better to use the cash to pay off this, the same can be sead for anybody with credit card debts at 20%, and even for people with out ether of theses paying off a mortgage faster, would still be the most profitable thing to do most of the time, if it was not for the tax benefits of a pension.
Not everybody will what to start there own business, but when they do it is a grate thing, 1 many serve show that theses people are overall happier than people who work for others, 2) investing in your won business, will often produce higher returns that anywhere else, 3) New company's coming in to being increases completion, which provides, lower prises, better service, and more job opportunities for everybody else. - because the tax system encourages people to lock there money away in a pension fund, it is hard to use it for capital for a new business, creating one more hurdle for want to be entrapernors.
there are more reasons, but to avoid making this to long I will stop there, and I am sorry for any spelling mistakes in this post I a dyslectic.
I would suggest this is also the reasoning behind a move to quarterly corporation tax. If, as seems to be expected, the plan is to introduce this around 2019 it means that for that financial year - just before an election - Osborne will be getting approximately 1.5 times the amount of corporation tax in one year.
Short term gain to make the finances look better prior to an election.
Oh my, the images here.
http://bit.ly/1VWybUU
Granted you could get rid of that idea, but no government is likely to any time soon.
I don't actually object to the idea of paying the tax sooner except for the considerable extra administrative burden. The only thing I really do object to in the tax system (apart from the actual amount of tax the government takes from us) is the payment on account that we have to do for personal tax. Paying tax before you have earned the money is a particularly despicable idea.
http://www.conservativehome.com/thetorydiary/2016/01/far-left-activists-are-trying-to-push-the-bma-to-illegal-action.html
I do appreciated you pointe and agree there is a social benefit in not having some people very poor, but I don't believe that the currant pension tax exception stops that, and eliminating it would not make it noticeably worsens. I do however support a Universal Welfare Payment, (or negative income tax) of the types advocated by the citizens Income Trust, or the Adam Smith Institute. That would in my opinion be much better at eliminating real poverty, without distorting the market.
But - and it's a massive, massive But - the transitional problems in getting from where we are now to this new structure would be absolutely horrendous. For a start, as Alastair says, it's extremely hard to see how defined-benefit pension schemes could fit into the new structure. These are contractual obligations for many employers, and particularly in the public sector. How on earth could that problem be solved? Secondly, we already have company money-purchase schemes, SIPPs, SSASs, Stakeholder pensions and some more obscure variants. They can't be wished away, and the administrative complexity of running both tax-free-on-in and tax-free-on-out schemes would make any taxman blanch.
For this reason, I don't think it will happen. I very much hope that Osborne will not raid pensions yet again; we need stability above all, there has already been far too much fiddling about with allowances and the structure. However, if he does want to extract further golden eggs from this goose, surely there are much easier ones to be had? Limiting the 25% tax-free amount to a lower percentage, or putting a cap on it, would be one obvious one. Another would be to take up Steve Webb's idea of a flat-rate tax refund rather giving tax relief at the highest marginal rate.
Either way, the bottom line for higher- or top-rate taxpayers is: make as big a pension contribution as you can afford before April, up to the maximum allowed. One thing is absolutely certain: tax treatment of pensions is not going to get more generous.
I kind of think it is the same mentality as buying a better bottle of wine at a restaurant. Initially, I always looked for the house wine, or the next one up- but now I look for a decent bottle, and pay. I wouldn't pay for it if I could afford it, but because I can, I pay for it and enjoy it. Again a win win- for me and the restaurant.
Bottom line is pay your taxes. And the more tax you pay, the better it is for you because the more money you have earned.