Steve Webb has got thee first – the rest of can thank him!

He shows how middle earners are being squeezed by the fiscal drag. No one is really winning despite tax-relief going up.

The worst off are the poorest earners in “net pay pensions” who are still waiting for some help saving for a pension.

Unfortunately, it is hard to read the charts from the post but here they are let free!

The chart above is how much the Treasury is collecting from people who are paying tax on the pensions they are getting.

It’s more expensive getting a pension linked to inflation and not much fun if your annuity (as most are) is paying “level” with no inflation increases.

At least you can tell yourself you aren’t rewarding the Chancellor some more for not getting any more

and this is the tax that people are’t paying on pensions they are paying into. Of course there is a downside for the Treasury in holding higher rate taxes down when everything else is going up.

There aren’t many people who have pensions big enough to pay tax on, but there are plenty of people who suffer from higher rate tax because of other income that they get from everything other than pensions.

Steve as ever is right

If you were a prime minister or chancellor with the confidence of another five years ahead of you ,  you might look at changing tax relief on contributions as an open goal waiting to be scored,

If you could explain that most of the tax relief is going to the people who are making all the decisions while very little tax relief is trickling though to people at the bottom of the income scale, you should have support from the main proportion of voters.

Higher rate tax-payers who are using a net-pay payment system get higher rate contribution relief through their payroll. People who are on “relief at source” have to collect their higher rate tax relief through their tax-assessment. Net Pay works very well if you are higher earning (as all the higher earning public servants are).

But net pay doesn’t work for people saving for a pension who don’t pay income tax. They’d get a 25% incentive meaning they’d only lose 75% of their pension contribution into pensions. Most master trusts use “net pay” and all DB plans use it.

We are actually going to see Government handing back pension money paid by poor people , starting this year. It’s due to the iniquity of giving no savings incentives to those on lowest earnings who get caught up in net payment systems.

Those entitled to a pay-out from HMRC should get it later this year – if they send HMRC their tax details.

The impending repayment of overcharged pension membership costs , at least shows that given 11 years , tax changes can be made. But don’t expect future changes to the system to take any shorter!