Property News · May 5, 2018

Pensions: is it right to charge 45-55% tax on incomes above £26,000? | Patrick Collinson


High earners get 40% relief, lower earners 20%, so the poor get much less tax relief than the well-offThis is going to be a difficult column to write. I’m about to make a plea for tax changes on behalf of people with £1m-plus pensions. Why? Because our tax system has created perverse incentives that are forcing high earners such as doctors, dentists, lawyers and accountants to save less, invest unwisely and engage advisers to try to work around the rules, when simple reforms can achieve the same policy aim – of making sure that the well-off don’t milk the pension tax relief system.Let’s be clear that while £1m is a huge sum, and far above what most workers are saving into their pension, it doesn’t actually translate into a luxury pension income. Buy an income with £1m at retirement and you’ll receive an annuity (a guaranteed income) of about £25,000-£26,000 a year, according to figures from Retirement Advantage. That’s a very comfortable sum – considering you’ll get the state pension on top – but hardly puts you in the round-the-world-cruise league. Yet if your pension fund is worth more than £1,030,000 – the current level of what’s called the “lifetime allowance” – the government will tax everything above that amount at either 55% (if you take it as a lump sum) or 45% (if you take it as income and you’re a standard rate tax payer). Continue reading…

Source : theguardian.com
Read more…Pensions: is it right to charge 45-55% tax on incomes above £26,000? | Patrick Collinson

You may also like...