I hear a lot of talk about cross subsidies from the poor, who make the money to the rich who spend this. I get this from union people I spend time to. They represent the silent majority who do not have the money to get the big pensions, the swanky property or the lifestyle of the people for whom this article is for.
Let’s be clear, the Government has not been cutting pensions, they’ve been promoting pensions through a Pensions Act and passing of legislation for Collective Pensions (CDC) for every employer. Pensions have had a very good time since Labour retired to power. What’s been targeted by this Government is the abuse of the pension system by those rich folk who use it as a means to hand over accumulated wealth to those who benefit from their inheritance. The Government is targeting the rich who aren’t paying their due of national insurance by exploiting “salary sacrifice” on pension contributions. Joanne Noble has coined a term Hero, (high-earning, rich and old).
I don’t worry about heroes , I think myself one. But to suppose that we have a right to ignore the “pension” in what we got the tax and NI breaks for, is to miss the point of tax-breaks. They’re to encourage certain behaviours which work for society.
The payment of pensions as a stream of taxed income (with a side -pocket) of tax-free cash) is what heroes signed up for.
But the Times readership, who are mostly Heroes , have another idea about what pensions are for.
Unlike younger generations, a Hero’s focus is no longer on building wealth, but on capital preservation. Their financial plans are all about tax efficiency: how to best draw from a pension and how to pass down their wealth to younger family members. No more saving or scrimping, at long last, they’ve made it!
The new (well not so new now) Government is fixing its sights on ensuring the state pension is increased to meet the most basic needs of everyone, to ensure that pension pots are turned to pensions (or annuities) and to make sure that the rich do not cream off the majority of income tax, capital gains tax , inheritance tax and national insurance through exploiting loopholes.
The comments to Johanna Noble’s article includes a number of readers who are “contemplating going abroad”. Sorry but expatriate pensions with tax relief on contributions will be taxed in the UK on what comes out.
I’ve been a Henry, Henry Tapper and high earning and not rich yet. There will always be people richer than me that I can aspire to be. I can reckon this achievable by paying less tax so that I can be a Hero.
Forget it! Complaining about losing loopholes will not make a Henry into a Hero, it will make him (or her) into a sad old git ( a little soggy)
Success in applying the rules set out in law is not reliant on loopholes (I prefer educated projections of future outcomes. A better guide than a two dimensional graph supporting the bias of the author of the graph.
Who can set out the proof of the 60% or is it 80% or even 30% and better than what? One might reasonably expect that taking on more risk would in some situations produce better returns at the expense of adding the possibility of loss. Adding mortality dividends it is assumed will add to the resulting profit enhancement assuming that we don’t have a medical innovation that adds 20 years to life expectancy. Big pots have sequencing risk as well as small pots
Conclusions. From a paper by Andrew Smithers
We are likely to experience another financial crisis within the next few years.
The monetary and fiscal policy tools used to boost demand after the last financial crisis in 2008 are, today, likely to either fail or precipitate a crisis.
While we cannot predict the timing, or even the certainty of the next crisis, it is highly probable. The fall in the stock market and the consequent recession are likely to be much more severe than last time.
It is often claimed that “markets do not like uncertainty”, but today uncertainty provides their key support.
The triggers for the next recession are likely to be falling profit margins or rising bond yields.
Rising bond yields are likely if governments seek to fund current deficits or because expectations for higher inflation rise.
Inflationary expectations are likely to rise if governments rely on short-term debt in preference to funding deficits, which will trigger a financial crisis.