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At some point in the next couple of years the State Pension will pass the Personal Allowance meaning that, in theory, those on a State Pension will be earning a taxable amount. The government have decided a workaround of fudging the taxable position of these pensioners by allowing them not to pay tax if that is their only income.
This will lead to challenges aots from age discrimination and other sources and will cause chaos. Surely the solution here is to start raising the Personal Allowance in line with the State Pension figure - I know this will cause financial problems for the treasury but it then opens up the door to discuss reform of the triple lock.
Any other solutions out there?
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Given that this government added another 500 pages to the Tax Code a week ago I suspect you can give up on a simple solution.
The Triple Lock has to be the first thing to go, not that any politician will countenance it.
We need a benign dictator quickly before we end up like France.
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Ooh if I could only think of such a person.......maybe someone around Hagley way could take the job.
I said Hagley not Highley!
Racist tit cricket and brother shagging is hardly benign.
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Apply PAYE to the state pension, replace the triple lock with a double lock, incentivising people saving for retirement by reversing the limit to salary sacrifice and defaulting workplace pensions to a global ETF for everyone 39 and under.
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I wouldn’t reverse the limit to SS but I would raise it considerably, I can’t see where the £2k has come from as it means fuck all. However the limit to salary sacrifice only applies to NI contributions as tax is not impacted and still gets the full deduction so it isn’t as bad as thought.
What would the benefit of one fund be for pensions or have i misunderstood?
Not certain on the benefit of applying PAYE to the state pension seeing as it wouldn’t apply to all and the admin costs would be great. Best to keep the state pension below the threshold (or at it) and keep that simple.
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I don't see the need to invest in a higher risk funds if, as they are younger, they will have compound (safer) returns over a longer period. The higher risk returns are needed when you are near the end and your pot is short.
And with auto-enrolment is place then it is unlikely that the future pensioners will have just the State Pension and puts a limited time benefit on the PAYE proposal, as everyone will have more than one income and need to do a return in the future. Plus there is the added administration around that as there is with any PAYE system. Running a PAYE system for 20m pensioners would be a nightmare.
By focussing on the issue and not the reason you will get into a death loop - the focus needs to be on that dependant ratio and increasing those paying in as opposed to the ones taking out. Having said that though maybe Nigel really does have the solution by reducing the NHS it should stop supporting the elderly and hep them on their way earlier therefore reducing the pension bill.
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You want to invest in riskier funds when you're further away from retirement and less risky funds when you're closer to retirement. Your logic is backwards. You also compound greater gains investing in higher return ventures.
Auto-enrollment isn't a silver bullet because the returns of the default funds are crap. If people don't have substantial retirement savings they will still be reliant on the state and that's why I said that the default funds need to invest more into stocks and shares and less into bonds and infrastructure assets.
You can just deduct the tax on the provision of the state pension, other incomes would follow the same process with tax but not need to factor in the state pension as that would already be deducted.
And you can manage a decreasing or static dependency ratio with productivity gains, otherwise you either need to do something nobody has managed and massively increase birth rates (which in of itself will only take effect 20 years after the fact) or massively increase immigration (which has massive political barriers).
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I understand the logic but the reality is, coming from someone at the end of the process, that I wish I'd have invested anything in my 20s (pensions weren't a thing back then unless you had a final salary one which were rocking horse shit to most of us) as even at a modest return that would have provided me with a bigger pot now and have made a big difference without the risk that you suggest. Taking the risky product is only needed if playing catch up.
And I agree on the autoenrolment returns but that wasn't the point, the point was that filing a return will be needed as there will be more than one source of income (no matter how crap), therefore taking away the point about not needing a return.
The point about the other pensions just deducting the tax at (say 20%) for ease only works if the individual has a full state pension (or one that takes them over the PA), not everyone gets a full State Pension due to lack of contributing years. That would result in some PA being lost without a return hence why I suggest the reality isn't as straight forward as ou suggest.
And agree on the last point but that needs to be made clear to the Reform voting groups because that isn't what they understand.
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It's not risky to invest in a global ETF when you're in your 20s and 30s in your retirement find as it's tracking the global economy, unless you expect the entire global economy to contract over 30 to 40 years. Fundamentally if you're putting money away for retirement in your 20s you shouldn't be investing it into bonds and infrastructure assets because you're not going to maximise your returns and you're so far away from retirement that the risks are negligible and the more sensibly that money is invested in your 20s the more returns you will have in your 50s when you are in a position to actually plan for retirement properly knowing you will be less reliant on the state to subsidise retirement. You're looking at having £620,000 more put aside for retirement averaging 7% annual returns against 4% returns over 40 years assuming you put aside 11% of your income into your pension and you start at £30k with an average 5% wage growth. That's significant.
Most pensioners now with incomes other than their state pension will need to file a tax return anyway so the effect would be miniscule, and they would be much less complicated as they don't need to factor in deductions. And if you're not getting enough in the state pension to take you over the threshold then you wouldn't have anything deducted.
