# Pension tax relief to be halved in budget.



## askalot (12 Oct 2008)

The Sunday Times says that next week's budget will see the tax relief on pension contributions halved for anyone earning over 35,000 a year. This would seem like a really retrograde step in light of the pension time bomb that government has been banging on about for the last few years. With pretty dismal returns over the past 8-9 years tax relief is the one thing that makes saving in a pension attractive.

The Sunday Times may be just 'flying a kite' but what do people think, is it a good idea or a bad idea.


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## shnaek (12 Oct 2008)

askalot said:


> With pretty dismal returns over the past 8-9 years tax relief is the one thing that makes saving in a pension attractive.



I think you said it yourself there.


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## room305 (12 Oct 2008)

Maybe they are hoping to goad people into spending money they would otherwise invest in a pension. Ideally spend it on houses but any spending is good.

Tomorrow will look after itself.


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## z103 (12 Oct 2008)

I never started a pension, although I have been looking into setting one up. If this goes through, I probably won't bother.

If this does happen, how many people will stop contributing to their pensions? Will you stop?


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## Towger (12 Oct 2008)

It is hard to see them halving the rate, I assume this means reducing it to the lower (currently) 20% band. They were only last year talking about topping up pension contributions for lower earners to give them 41% relief.
I for one would stop contributing to my pension fund, if this happened. Even before the last couple of weeks madness, over the last 10 years I would have been better off just sticking the money in a high interest account. The tax relief is the only thing that makes it worth while. Even then they are still be taxing my pension when I retire, better to pay tax now and have full control over the money.


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## Maine (12 Oct 2008)

Towger said:


> It is hard to see them halving the rate, I assume this means reducing it to the lower (currently) 20% band. They were only last year talking about topping up pension contributions for lower earners to give them 41% relief.
> I for one would stop contributing to my pension fund, if this happened. Even before the last couple of weeks madness, over the last 10 years I would have been better off just sticking the money in a high interest account. The tax relief if the only thing that makes it worth while. Even then they would still be taxing my pension when I retire, better to pay tax now and have full control over the money.


 
Can they do this if they do not cut the pensions in the public sector. Have to cut all pensions for TDs as well

If they do it then pensions are worthless........a dinosaur industry


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## cianlanders (12 Oct 2008)

Towger said:


> It is hard to see them halving the rate, I assume this means reducing it to the lower (currently) 20% band. They were only last year talking about topping up pension contributions for lower earners to give them 41% relief.
> I for one would stop contributing to my pension fund, if this happened. Even before the last couple of weeks madness, over the last 10 years I would have been better off just sticking the money in a high interest account. The tax relief if the only thing that makes it worth while. Even then they would still be taxing my pension when I retire, better to pay tax now and have full control over the money.


Having contributed to a  personal pension for the last 10 years my retrurn has been less  than 2 percent and i have stopped contributing, preferring to stick it in the piggy bank.


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## theoneill (13 Oct 2008)

This would certainly be the death nail in my pension. After seeing over 10% wiped out in one year the only incentive I have in keeping it open is the generous tax relief. However politically I can’t see it happening, not only will it cost pension funds but it will cost votes too.

However   at this stage this has to be pure speculation. I’ll reserve my anger / delight until tomorrow evening.


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## Homer (13 Oct 2008)

Apart from the obvious and extreme policy ramifications, I don't see how they can do this, unless they also make employer pension contributions subject to BIK, with standard rate relief applying to the total contribution (subject to overall limits as before or amended).

Otherwise, it would leave the system wide open to manipulation for those in employment, particularly proprietors of small businesses.

They would also have to change the whole net pay system that currently applies in the public sector and in most private sector schemes.

Regards
Homer


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## Square Mile (13 Oct 2008)

Hello

Apart from the fact that private pensions have not even kept up with inflation over the past ten years (which undermines the argument put forward by pension providers that we need to have a long term view of pnsions), it is important to recognise that pension contributions are not 'tax free' but rather 'tax deferred'.  

The pension contributions are not taxed so as to allow a larger fund to grow to enable the purchase of a larger annuity which will pay a regular pension. The pension from the annuity however will be taxed at whatever rate applies i.e. up to 41%.

If pension contributions do not benefit from relief at the higher level, where will that leave the pensioner at the time of retirement. Will the pensions that they receive be correspondingly taxed at the lower rate regardless of the size of the pension.

SM


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## Purple (13 Oct 2008)

Homer said:


> Apart from the obvious and extreme policy ramifications, I don't see how they can do this, unless they also make employer pension contributions subject to BIK, with standard rate relief applying to the total contribution (subject to overall limits as before or amended).
> 
> Otherwise, it would leave the system wide open to manipulation for those in employment, particularly proprietors of small businesses.
> 
> ...



Are mos private sector schemes DB?


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## GeneralZod (13 Oct 2008)

Hopefully this is just a scare story.


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## askalot (14 Oct 2008)

I see today's Irish Times is running the same story, looks like I might be dropping my pension! 

"A lot done more to do" should be more like "Live for today because tomorrow may never come".


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## Bronte (14 Oct 2008)

Purple said:


> Are mos private sector schemes DB?


  I understood that Defined Benefit schemes were now few and far between and employers have been moving to defined contribution instead as the costs are far lower for the employer.


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## csirl (14 Oct 2008)

> Are mos private sector schemes DB?


 
I read in a report recently that slightly more than 50% of private sector employees in Ireland are on DB schemes. Many of these may be legacy schemes - most people who've started work in recent years appear to be on defined contribution.


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