I wonder why the Govt didn't increase the normal 6.5% of salary contribution rate, instead of this levy?
Surely that would have been simpler?
Is it because a levy is seen as temporary?
I've a couple of hypotheses on this.I wonder why the Govt didn't increase the normal 6.5% of salary contribution rate, instead of this levy?
Surely that would have been simpler?
Is it because a levy is seen as temporary?
They could still have done that, while retaining the [gross - (2*COAP)] basis, by constructing the calculations in a slightly more sophisticated - but not particularly complicated - way.There is also the point that imposing a levy allowed the government to apply different rates to different income levels.
...Make all of it relievable at only the standard rate of tax.
Looking at a quick calculation, the rates probably need to be adjusted upwards a bit earlier to raise anything resembling the same amount, but it does have the attraction of eliminating anomalies based on the rate of relief - which see people on the standard rate hit harder at certain pay levels - and excluding those people who get minimal pension benefit anyway.
I would see a difficulty in doing that for public sector employees only. And if you extended such a rule to the private sector, you enter a minefield of equity problems because of the wide variety of schemes that exist, and the different rates of employer contribution.
It is anomalous that people on higher pay get a greater tax contribution to their pension schemes, and attention has been drawn to that anomaly in relation to the pension levy. But that is just another instance of an anomaly that already existed.
I see no reason why tax credits have to be tied to the rates at which taxes are charged. Is there anything wrong with giving a tax credit of, say, 25% on all pension contributions? [After you have worked out how to deal with the employer's actual or imputed contribution.]
I wonder why the Govt didn't increase the normal 6.5% of salary contribution rate, instead of this levy?
Surely that would have been simpler?
Is it because a levy is seen as temporary?
Ah yes, but it's special because it's still the "levy". And since it's being levied only on public sector employees by means of special rules, there's no reason it shouldn't be subject to additional special rules.I would see a difficulty in doing that for public sector employees only. And if you extended such a rule to the private sector, you enter a minefield of equity problems because of the wide variety of schemes that exist, and the different rates of employer contribution.
Yes, you're right that it's a pre-existing anomaly, and it's yet another reason that so few low to middle income earners have adequate - or any - personal pension provision unless they're provided / contributed to by their employers.It is anomalous that people on higher pay get a greater tax contribution to their pension schemes, and attention has been drawn to that anomaly in relation to the pension levy. But that is just another instance of an anomaly that already existed.
I see no reason why tax credits have to be tied to the rates at which taxes are charged. Is there anything wrong with giving a tax credit of, say, 25% on all pension contributions? [After you have worked out how to deal with the employer's actual or imputed contribution.]
There is also the point that imposing a levy allowed the government to apply different rates to different income levels.