The document provides an overview of the current pension tax relief system in the UK and considers alternatives. It notes that the current system aims to encourage retirement saving and avoid double taxation. It then analyzes in detail how the system works, including that it follows an EET structure but offers some tax advantages. The document also examines who benefits from the current system, estimates its annual cost, and models outcomes of potential reforms like moving to a single-rate tax relief system or a TEE structure. It considers factors like incentives, transparency, and long-term impacts of any changes.
20151003 PPI Comparison of pension outcomes under EET and TEE tax treatmentSarah Luheshi
This report analyzes the impact of potential reforms to the UK's pension tax relief system, including maintaining the current EET system or moving to a TEE system. It models the effects on individuals' retirement savings based on their tax rates during working life. It finds that basic rate taxpayers tend to benefit from a flat rate EET system, while higher rate taxpayers see reduced savings under TEE or lower-rate EET. It also examines the cost implications for the government and distributional effects across income levels and ages. Finally, it considers an alternative system treating defined benefit and defined contribution pensions differently based on annual and lifetime allowances.
About 46% of American households will pay no federal income tax in 2011. Half of these households pay no tax due to basic exemptions and deductions in the tax code, while the other half pay no tax due to tax expenditures that eliminate their tax liability or provide refunds. The tax provisions that most significantly reduce tax liability for lower-income households are benefits for seniors and credits for children and the working poor. Middle-income households are most impacted by credits for children and education as well as itemized deductions. Higher-income households paying no tax benefit most from deductions and reduced rates on capital gains and dividends.
The document discusses potential reforms to the UK's tax system for private pensions. It considers options like providing a flat tax credit for pension contributions rather than tax relief that varies by income tax bracket. Another idea is incentivizing employers to match employee pension contributions through tax credits. However, reforms face challenges like losing tax revenue and being politically unpopular. The optimal approach may be to increase the lump sum tax-free withdrawal allowance to encourage broader pension savings.
There is apparently a huge amount of money to be extracted through a clampdown on tax avoidance (mysteriously missed by all previous clampdowns). There is yet more money to be extracted from those on very high incomes saving in a private pension.
The document discusses taxation as a tool for stimulating revenue generation in public sector organizations. It covers topics such as effectiveness and efficiency in tax collection systems, options for enhancing tax revenue like increasing tax rates and widening the tax base, the efficacy of tax incentives for economic development, and the impact of tax incentives on revenue generation and productivity. The document also examines prospects for strengthening collaboration between tax authorities and other stakeholders, as well as strategies for improving tax debt recovery. Overall, the presentation argues that taxation is crucial for revenue generation and that administration must be improved through best practices and tax justice to stimulate greater tax revenue.
The document summarizes major changes to the UK benefits system as outlined in the government's Emergency Budget, Comprehensive Spending Review, and Welfare Reform Bill. It details measures such as uprating benefits in line with CPI instead of earnings, freezing child benefit, limiting total benefits, time limiting contributory ESA to 1 year, and localizing council tax benefit. The new Universal Credit system will replace most working-age benefits and automatically adjust payments monthly based on earnings reported by HMRC.
The document summarizes the UK government's commitments regarding devolved finance in Scotland, Wales, and Northern Ireland and critiques some issues with the current approach. Specifically:
1) The government favors Scotland over Wales by implementing the Calman Commission recommendations for Scotland but delaying similar action for Wales.
2) Treating each region separately and not reviewing the Barnett formula limits considerations of equity across the UK.
3) Adopting the Calman model for Scotland precludes other options for Wales and Northern Ireland since their tax revenues are lower than the UK average.
4) The block grant system ties devolved governments to policies in England and cannot accommodate significant divergence between the regions. Long-term strategic
20151003 PPI Comparison of pension outcomes under EET and TEE tax treatmentSarah Luheshi
This report analyzes the impact of potential reforms to the UK's pension tax relief system, including maintaining the current EET system or moving to a TEE system. It models the effects on individuals' retirement savings based on their tax rates during working life. It finds that basic rate taxpayers tend to benefit from a flat rate EET system, while higher rate taxpayers see reduced savings under TEE or lower-rate EET. It also examines the cost implications for the government and distributional effects across income levels and ages. Finally, it considers an alternative system treating defined benefit and defined contribution pensions differently based on annual and lifetime allowances.
About 46% of American households will pay no federal income tax in 2011. Half of these households pay no tax due to basic exemptions and deductions in the tax code, while the other half pay no tax due to tax expenditures that eliminate their tax liability or provide refunds. The tax provisions that most significantly reduce tax liability for lower-income households are benefits for seniors and credits for children and the working poor. Middle-income households are most impacted by credits for children and education as well as itemized deductions. Higher-income households paying no tax benefit most from deductions and reduced rates on capital gains and dividends.
The document discusses potential reforms to the UK's tax system for private pensions. It considers options like providing a flat tax credit for pension contributions rather than tax relief that varies by income tax bracket. Another idea is incentivizing employers to match employee pension contributions through tax credits. However, reforms face challenges like losing tax revenue and being politically unpopular. The optimal approach may be to increase the lump sum tax-free withdrawal allowance to encourage broader pension savings.
There is apparently a huge amount of money to be extracted through a clampdown on tax avoidance (mysteriously missed by all previous clampdowns). There is yet more money to be extracted from those on very high incomes saving in a private pension.
The document discusses taxation as a tool for stimulating revenue generation in public sector organizations. It covers topics such as effectiveness and efficiency in tax collection systems, options for enhancing tax revenue like increasing tax rates and widening the tax base, the efficacy of tax incentives for economic development, and the impact of tax incentives on revenue generation and productivity. The document also examines prospects for strengthening collaboration between tax authorities and other stakeholders, as well as strategies for improving tax debt recovery. Overall, the presentation argues that taxation is crucial for revenue generation and that administration must be improved through best practices and tax justice to stimulate greater tax revenue.
The document summarizes major changes to the UK benefits system as outlined in the government's Emergency Budget, Comprehensive Spending Review, and Welfare Reform Bill. It details measures such as uprating benefits in line with CPI instead of earnings, freezing child benefit, limiting total benefits, time limiting contributory ESA to 1 year, and localizing council tax benefit. The new Universal Credit system will replace most working-age benefits and automatically adjust payments monthly based on earnings reported by HMRC.
The document summarizes the UK government's commitments regarding devolved finance in Scotland, Wales, and Northern Ireland and critiques some issues with the current approach. Specifically:
1) The government favors Scotland over Wales by implementing the Calman Commission recommendations for Scotland but delaying similar action for Wales.
2) Treating each region separately and not reviewing the Barnett formula limits considerations of equity across the UK.
3) Adopting the Calman model for Scotland precludes other options for Wales and Northern Ireland since their tax revenues are lower than the UK average.
4) The block grant system ties devolved governments to policies in England and cannot accommodate significant divergence between the regions. Long-term strategic
The document summarizes the Thrift Savings Plan (TSP), which provides retirement benefits for US federal civil servants. It discusses:
1) How the old defined benefit pension system was reformed in 1983 to include a new defined contribution TSP plan alongside reduced defined benefits and Social Security.
2) The TSP's governance structure, which is designed for independence, and its investment options including index funds and lifecycle funds.
3) How the TSP operates in the accumulation phase through contributions, matching, and investment choices, and in the payout phase through withdrawal options.
4) The TSP's strong participation rates, growth in assets, low costs compared to other plans, and lessons learned over
Saul Jacka on regulation, risk and (dened benet) pensionsHenry Tapper
This document summarizes the background and aftermath of the collapse of Equitable Life in 2000. It discusses how Equitable Life failed to properly account for and hedge the risk of guaranteed annuity rates, which ultimately led to its insolvency when interest rates fell. Several investigations and reports afterwards found regulatory failures and called for reform of pension regulation and actuarial oversight. The Pensions Regulator was established to help protect pensions, but some argue it has overly focused on reducing dependence on employer funding and covenant beyond what is reasonable.
Psoj Economic Policy Framework January 2010guest8b0934
The document outlines the PSOJ's economic policy framework to achieve high rates of sustained economic growth and employment in Jamaica. It identifies that ensuring macroeconomic stability is necessary but not sufficient, and recommends meaningful reductions in debt servicing and public sector wages through debt management reforms, rationalizing the public sector, and budget process reforms. It also recommends reforming Jamaica's complex, inefficient and unfair tax system.
Psoj Economic Policy Framework January 2010guestd05908f
The document outlines the PSOJ's economic policy framework to achieve high rates of sustained economic growth and employment in Jamaica. It makes the following key points:
1) Jamaica has deep economic imbalances, with 84% of government spending going to interest and public sector pay, leaving little for critical programs. The debt level is extremely high at 137% of GDP.
2) Ensuring macroeconomic stability through meaningful reductions in debt servicing and public sector wages, and reforming the budget process, is necessary to improve Jamaica's economic situation.
3) Reforming the tax system is also important as the current system is complex, inefficient and unfair, making it difficult for businesses to pay taxes.
Loop holes in tax codes allow exploitation of ambiguities and technicalities to reduce or eliminate taxes legally. Some ways to avoid taxes include contributing to charity, deferring income, or doing a bond swap. However, exploiting loopholes may lead to intensive tax audits. The Direct Tax Code aims to simplify taxes through a standardized tax slab and removal of most exemptions.
Nick Pearce: Growth regimes, statecraft and incremental change. Presentation at seminar Reforming social security – What can we learn from basic income experiments? 17.12.2021.
- The document discusses basic income as a policy, mirror of existing welfare systems, and metaphor for rethinking social and economic structures.
- Research examines what drives political support for basic income across countries, finding it influenced by ideological, socio-economic, and institutional factors that vary in different contexts.
- Case studies of the UK and Finland show support is sometimes more abstract than concrete and existing welfare states shape basic income politics, with individual support also linked to preferences for targeting and conditionality relative to national systems.
TANZANIA AS A FUTURE PETRO-STATE:
DO PETRO-EXPECTATIONS CHALLENGE THE ORDINARY TAX SYSTEM?
Presentation made at the ICTD Annual Centre Meeting
Arusha, 2014
Mary murphy nui maynooth post budget seminar slides 19 oct 16NevinInstitute
This document discusses advancing human rights and equality proofing in the Irish budgetary process. It outlines IHREC's goals and powers, as well as UN recommendations to ensure austerity measures are phased out and rights are protected. It proposes establishing a national proofing committee and conducting social impact assessments of budgets. Developing the parliamentary budget office and departmental capacity for proofing is emphasized. Future steps include ministerial statements on rights and equality in budgets, piloting proofing models, and promoting public support.
George Osborne presented his third Budget on March 21st, 2012, reaffirming the need for stability in the UK economy. Some key points included an increase to the personal tax allowance, a reduction in the additional income tax rate from 50% to 45% starting in 2013, and details on how Child Benefit will be taxed for households earning over £50,000. The Budget also proposed further cuts to corporation tax rates and measures to encourage business investment through initiatives like the Enterprise Investment Scheme and new Seed Enterprise Investment Scheme.
Independent oversight bodies lessons from fiscal productivity and regulatory ...OECDtax
This document summarizes an academic paper that discusses the rise of independent oversight bodies in fiscal policy, productivity, and regulation. It begins by noting the growing trend for governments to establish independent, non-partisan institutions to provide oversight and analysis to inform policymaking. However, some argue this replaces democracy with technocracy. The document then examines three types of independent bodies - independent fiscal institutions, independent productivity commissions, and regulatory oversight bodies. It provides examples from different countries and discusses key features like independence. In conclusion, it considers lessons learned and debates around technocratic approaches.
The document discusses options for reforming social security revenues presented by groups like the AARP and Congressional Budget Office. It outlines 9 options from the CBO for changing the payroll tax rate and maximum taxable earnings to improve social security's finances. These include gradually increasing the payroll tax rate by 1-3 percentage points, eliminating or raising the taxable earnings maximum, and taxing some or all earnings above the maximum but without increasing benefits. The document analyzes how each option would impact social security revenues, long-term financing, and the trust funds exhaustion date. It notes the challenge of implementing changes due to many competing ideas and lack of political compromise.
Accountability Institutions by Joachim WehnerOECD Governance
Presentation by Joachim Wehner at the 10th annual meeting of the Senior Budget Officials Performance and Results Network held on 24-25 November 2014. Find more information at http://www.oecd.org/gov/budgeting
Union Budget 2009 Accretive Special CommuniqueVishnu Bagri
The document provides an overview and summary of key proposals from the Indian Union Budget for 2009. Some key points:
- No changes were made to corporate or personal income tax rates. MAT was increased to 15% from 10% for companies.
- Exemption limits for personal income tax and wealth tax were increased. Fringe benefits tax was abolished.
- GST is planned for implementation in April 2010 to integrate goods and services taxes.
- Key proposals focused on improving tax system efficiency and equity while continuing fiscal support for certain sectors.
This document summarizes recent empirical research on the relationship between taxation and economic development. It outlines a conceptual framework for estimating the elasticity of taxable income and discusses credible methods used in developed countries that rely on exogenous variation from tax reforms. The document then presents evidence from recent studies that have estimated tax elasticities in developing countries using large administrative tax datasets, including a study from South Africa that analyzed taxpayers' responses to kink points in the corporate income tax schedule.
The most recent white paper from Pentegra. The purpose of the timing of this paper—immediately after the signing of the Executive Order promoting MEPs—is to spur constructive dialogue nationally about the best path forward with respect to MEPs.
This document provides an overview and goals of the Trump Administration's unified framework for tax reform. The framework aims to simplify the tax code, provide tax relief for middle-class families and small businesses, and make the United States more competitive globally. It proposes consolidating the current seven tax brackets into three brackets of 12%, 25%, and 35%. It also roughly doubles the standard deduction and increases the child tax credit to benefit middle-class families. The framework seeks to lower the corporate tax rate to 20% and allow businesses to immediately write off capital investments to spur business investment and growth.
Este documento resume las ventajas y desventajas de usar PowerPoint para presentaciones. Las ventajas incluyen que sirve como apoyo visual para el orador, hace que el contenido sea más visual y atractivo, y atrae la atención del público. Las desventajas son que requiere saber usarlo sin abusar de imágenes y colores, el público puede cansarse al recibir un doble discurso, el mensaje es unilateral sin participación del público, y es una herramienta algo limitada. Para hacer una buena presentación en PowerPoint, el mensaje debe ser
20151022 PPI Comparison of DC pensions regulatorsSarah Luheshi
This document summarizes a report that compares the regulatory frameworks for defined contribution pensions in the UK that are trust-based, regulated by The Pensions Regulator (TPR), and contract-based, regulated by the Financial Conduct Authority (FCA). It finds that while both regulators aim to protect consumers, the FCA regime is more rigorous in preventing issues, while the TPR regime focuses on enabling trustees and addressing issues after the fact. Both regimes have strengths that could help the other improve. Ensuring adequate contributions from employers is an important role of TPR. Concerns include potential winding up of some master trusts and lack of transparency potentially leading to worse outcomes.
The document summarizes the Thrift Savings Plan (TSP), which provides retirement benefits for US federal civil servants. It discusses:
1) How the old defined benefit pension system was reformed in 1983 to include a new defined contribution TSP plan alongside reduced defined benefits and Social Security.
2) The TSP's governance structure, which is designed for independence, and its investment options including index funds and lifecycle funds.
3) How the TSP operates in the accumulation phase through contributions, matching, and investment choices, and in the payout phase through withdrawal options.
4) The TSP's strong participation rates, growth in assets, low costs compared to other plans, and lessons learned over
Saul Jacka on regulation, risk and (dened benet) pensionsHenry Tapper
This document summarizes the background and aftermath of the collapse of Equitable Life in 2000. It discusses how Equitable Life failed to properly account for and hedge the risk of guaranteed annuity rates, which ultimately led to its insolvency when interest rates fell. Several investigations and reports afterwards found regulatory failures and called for reform of pension regulation and actuarial oversight. The Pensions Regulator was established to help protect pensions, but some argue it has overly focused on reducing dependence on employer funding and covenant beyond what is reasonable.
Psoj Economic Policy Framework January 2010guest8b0934
The document outlines the PSOJ's economic policy framework to achieve high rates of sustained economic growth and employment in Jamaica. It identifies that ensuring macroeconomic stability is necessary but not sufficient, and recommends meaningful reductions in debt servicing and public sector wages through debt management reforms, rationalizing the public sector, and budget process reforms. It also recommends reforming Jamaica's complex, inefficient and unfair tax system.
Psoj Economic Policy Framework January 2010guestd05908f
The document outlines the PSOJ's economic policy framework to achieve high rates of sustained economic growth and employment in Jamaica. It makes the following key points:
1) Jamaica has deep economic imbalances, with 84% of government spending going to interest and public sector pay, leaving little for critical programs. The debt level is extremely high at 137% of GDP.
2) Ensuring macroeconomic stability through meaningful reductions in debt servicing and public sector wages, and reforming the budget process, is necessary to improve Jamaica's economic situation.
3) Reforming the tax system is also important as the current system is complex, inefficient and unfair, making it difficult for businesses to pay taxes.
Loop holes in tax codes allow exploitation of ambiguities and technicalities to reduce or eliminate taxes legally. Some ways to avoid taxes include contributing to charity, deferring income, or doing a bond swap. However, exploiting loopholes may lead to intensive tax audits. The Direct Tax Code aims to simplify taxes through a standardized tax slab and removal of most exemptions.
Nick Pearce: Growth regimes, statecraft and incremental change. Presentation at seminar Reforming social security – What can we learn from basic income experiments? 17.12.2021.
- The document discusses basic income as a policy, mirror of existing welfare systems, and metaphor for rethinking social and economic structures.
- Research examines what drives political support for basic income across countries, finding it influenced by ideological, socio-economic, and institutional factors that vary in different contexts.
- Case studies of the UK and Finland show support is sometimes more abstract than concrete and existing welfare states shape basic income politics, with individual support also linked to preferences for targeting and conditionality relative to national systems.
TANZANIA AS A FUTURE PETRO-STATE:
DO PETRO-EXPECTATIONS CHALLENGE THE ORDINARY TAX SYSTEM?
Presentation made at the ICTD Annual Centre Meeting
Arusha, 2014
Mary murphy nui maynooth post budget seminar slides 19 oct 16NevinInstitute
This document discusses advancing human rights and equality proofing in the Irish budgetary process. It outlines IHREC's goals and powers, as well as UN recommendations to ensure austerity measures are phased out and rights are protected. It proposes establishing a national proofing committee and conducting social impact assessments of budgets. Developing the parliamentary budget office and departmental capacity for proofing is emphasized. Future steps include ministerial statements on rights and equality in budgets, piloting proofing models, and promoting public support.
George Osborne presented his third Budget on March 21st, 2012, reaffirming the need for stability in the UK economy. Some key points included an increase to the personal tax allowance, a reduction in the additional income tax rate from 50% to 45% starting in 2013, and details on how Child Benefit will be taxed for households earning over £50,000. The Budget also proposed further cuts to corporation tax rates and measures to encourage business investment through initiatives like the Enterprise Investment Scheme and new Seed Enterprise Investment Scheme.
Independent oversight bodies lessons from fiscal productivity and regulatory ...OECDtax
This document summarizes an academic paper that discusses the rise of independent oversight bodies in fiscal policy, productivity, and regulation. It begins by noting the growing trend for governments to establish independent, non-partisan institutions to provide oversight and analysis to inform policymaking. However, some argue this replaces democracy with technocracy. The document then examines three types of independent bodies - independent fiscal institutions, independent productivity commissions, and regulatory oversight bodies. It provides examples from different countries and discusses key features like independence. In conclusion, it considers lessons learned and debates around technocratic approaches.
The document discusses options for reforming social security revenues presented by groups like the AARP and Congressional Budget Office. It outlines 9 options from the CBO for changing the payroll tax rate and maximum taxable earnings to improve social security's finances. These include gradually increasing the payroll tax rate by 1-3 percentage points, eliminating or raising the taxable earnings maximum, and taxing some or all earnings above the maximum but without increasing benefits. The document analyzes how each option would impact social security revenues, long-term financing, and the trust funds exhaustion date. It notes the challenge of implementing changes due to many competing ideas and lack of political compromise.
Accountability Institutions by Joachim WehnerOECD Governance
Presentation by Joachim Wehner at the 10th annual meeting of the Senior Budget Officials Performance and Results Network held on 24-25 November 2014. Find more information at http://www.oecd.org/gov/budgeting
Union Budget 2009 Accretive Special CommuniqueVishnu Bagri
The document provides an overview and summary of key proposals from the Indian Union Budget for 2009. Some key points:
- No changes were made to corporate or personal income tax rates. MAT was increased to 15% from 10% for companies.
- Exemption limits for personal income tax and wealth tax were increased. Fringe benefits tax was abolished.
- GST is planned for implementation in April 2010 to integrate goods and services taxes.
- Key proposals focused on improving tax system efficiency and equity while continuing fiscal support for certain sectors.
This document summarizes recent empirical research on the relationship between taxation and economic development. It outlines a conceptual framework for estimating the elasticity of taxable income and discusses credible methods used in developed countries that rely on exogenous variation from tax reforms. The document then presents evidence from recent studies that have estimated tax elasticities in developing countries using large administrative tax datasets, including a study from South Africa that analyzed taxpayers' responses to kink points in the corporate income tax schedule.
The most recent white paper from Pentegra. The purpose of the timing of this paper—immediately after the signing of the Executive Order promoting MEPs—is to spur constructive dialogue nationally about the best path forward with respect to MEPs.
This document provides an overview and goals of the Trump Administration's unified framework for tax reform. The framework aims to simplify the tax code, provide tax relief for middle-class families and small businesses, and make the United States more competitive globally. It proposes consolidating the current seven tax brackets into three brackets of 12%, 25%, and 35%. It also roughly doubles the standard deduction and increases the child tax credit to benefit middle-class families. The framework seeks to lower the corporate tax rate to 20% and allow businesses to immediately write off capital investments to spur business investment and growth.
Este documento resume las ventajas y desventajas de usar PowerPoint para presentaciones. Las ventajas incluyen que sirve como apoyo visual para el orador, hace que el contenido sea más visual y atractivo, y atrae la atención del público. Las desventajas son que requiere saber usarlo sin abusar de imágenes y colores, el público puede cansarse al recibir un doble discurso, el mensaje es unilateral sin participación del público, y es una herramienta algo limitada. Para hacer una buena presentación en PowerPoint, el mensaje debe ser
20151022 PPI Comparison of DC pensions regulatorsSarah Luheshi
This document summarizes a report that compares the regulatory frameworks for defined contribution pensions in the UK that are trust-based, regulated by The Pensions Regulator (TPR), and contract-based, regulated by the Financial Conduct Authority (FCA). It finds that while both regulators aim to protect consumers, the FCA regime is more rigorous in preventing issues, while the TPR regime focuses on enabling trustees and addressing issues after the fact. Both regimes have strengths that could help the other improve. Ensuring adequate contributions from employers is an important role of TPR. Concerns include potential winding up of some master trusts and lack of transparency potentially leading to worse outcomes.
Walmart plans to invest in India through a joint venture with Bharti. This will generate jobs through retail operations and infrastructure development while also helping small businesses and farmers lower costs and increase profits. Walmart aims to offer customers good products at low prices. It is committed to following India's rules for foreign direct investment and believes its entry can benefit both customers and its business. It also hopes to expand opportunities for farmers and lower the cost of living in India.
Thaspine inhibits human topoisomerase IB in a dose-dependent manner by intercalating between DNA base pairs and binding to the enzyme's active site, reducing its ability to cleave DNA. Studies show Thaspine acts as both a topoisomerase poison and inhibitor, slowing the religation rate and preventing formation of the cleavable complex. Thaspine is a promising natural anticancer agent that warrants further investigation for its effects on topoisomerase IB catalysis and mechanism of action.
20150921 PPI State Street myths and rules of thumb in retirement incomeSarah Luheshi
This document summarizes research on how "rules of thumb" could help individuals manage their defined contribution pension pots under the new UK pension flexibilities. It discusses two potential rules of thumb - the "4% rule" where individuals withdraw 4% of their pot annually adjusted for inflation, and securing a "basic income to meet essential needs." The research found that while received wisdom may be true for some, rules of thumb phrased in clear, easy to understand language could help guide retirement income decisions for many by addressing risks like drawing down pensions too quickly. Financial education is still needed to ensure rules of thumb benefit individuals.
MIA Sunway-TES Accounting Quiz 2014 (Fact Sheet)randytoo
The Malaysian Institute of Accountants (“MIA”) together with Sunway TES Sdn Bhd (“Sunway TES”) had in 2013 organised the inaugural MIA Sunway TES Accounting Quiz 2013 (“AQ2013”) which was open to all Form 4 and Form 5 students in Selangor, Federal Territory of Kuala Lumpur and Putrajaya.
This year, for the Accounting Quiz 2014 (“AQ 2014”), the competition is open to all Form 4 and Form 5 students throughout Malaysia and not just limited to Selangor, Selangor, Federal Territory of Kuala Lumpur and Putrajaya.
The document provides a broadband troubleshooting guide for users experiencing issues connecting to or using their Celcom broadband connection. It outlines 7 basic steps to troubleshoot connection issues, including ensuring the SIM card and modem are inserted properly, checking for network signal and connection status. It also provides guidance on troubleshooting disconnection, inability to browse, and slow browsing issues, recommending steps like testing the SIM card and modem on different devices, checking firewall and antivirus settings, and contacting customer support if problems persist.
1. O documento apresenta um projeto de banheiro seco como alternativa ao saneamento em comunidades rurais e tradicionais.
2. O projeto inclui o dimensionamento e detalhamento de um banheiro seco compostável, sistema de tratamento de águas cinza com caixa de gordura, caixa de passagem, wetland e vala de filtração, além da análise do composto gerado.
3. Foram realizados estudos técnicos, econômicos e ambientais para avaliar a viabilidade do sistema proposto como
Huawei - Celcom Site Survey April 2016 proposalAbdullah Arsath
The document discusses a site survey project by Huawei for Celcom to survey 800 cell sites over 2 months. It outlines the plan to clear sites, including having 60 survey teams that each aim to complete 3 sites per day, which would allow them to finish the project on schedule. The document provides examples of the type of drawings and photos required for the site surveys, and how teams should submit the survey results online through Dropbox or Google Drive. It also discusses how keys and work permits will be handled to help the survey teams complete their work. Completing the site surveys successfully would allow Huawei to then install equipment at the surveyed sites.
This document provides information about advertising opportunities through the Truman Media Network (TMN) at Truman State University. It outlines the various media outlets of TMN including the Index newspaper, Detours magazine, TMN online website, TMN TV, and KTRM radio station. The document provides details on advertising options for each individual outlet such as ad sizes and prices. It also presents converged advertising packages that allow advertisers to promote across multiple TMN outlets together.
20151105 Automatic enrolment scenarios post 2017 report for TUC finalSarah Luheshi
This document analyzes different scenarios for increasing contribution levels to automatic enrollment pensions post-2017. It models the impact of higher contribution rates and auto-escalation on individuals' retirement outcomes and costs to the exchequer. Scenarios that increase contributions through age, job tenure, pay increases, or pay level are projected to grow pension pots but have varying effects depending in individual careers. Raising contribution rates overall or providing a flat government bonus would increase costs of tax relief substantially. Consideration must be given to how increases impact opt-out rates and outcomes across income levels.
The document summarizes key aspects of India's proposed Direct Tax Code (DTC) which intends to replace the country's 50-year old Income Tax Act. Some key changes proposed in the DTC include removing most tax saving schemes, introducing a new EET system for taxing retirement savings instead of the current EEE system, modifying income tax slabs, and reducing the corporate tax rate from 34% to 30%. The DTC has faced criticism for potentially resulting in increased tax liability and litigation as well as not introducing significant simplifications to the tax system.
Workplace Pensions - The impact on people who employ carersChris Gardner
The document discusses the impact of new workplace pension rules on individuals who employ carers. It explains that employers will now be required to automatically enroll eligible employees into a qualifying pension scheme and contribute a minimum amount. This poses challenges for elderly or vulnerable people who directly employ carers, as they will now have legal responsibilities and costs as employers. The document considers two options for how such individuals can meet the new requirements - establishing their own pension scheme or using the low-cost National Employment Savings Trust (NEST) scheme. It also notes that many elderly employers may switch to using care agencies instead, passing on the pension obligations.
George Osborne announced that he will not be making any changes to pension taxation in the upcoming Budget, despite expectations to the contrary. Some commentators believe the Chancellor was concerned that upsetting voters before the European referendum went too far. While there is relief that another pension revolution has been avoided, Osborne gave no indication on maintaining employer National Insurance contribution relief for pension contributions, which costs £11 billion per year. He also did not comment on salary sacrifice arrangements. The author argues that the tax-free lump sum received on retirement remains an anomalous policy even 30 years after first being questioned, and proposes a phase out of the tax-free lump sum over 5 years if they were Chancellor.
How will retirement reform impact your retirement fund by Olano Makhubela10X Investments
Chief Director, Financial Investments and Savings, National Treasury presented at the 10X Retirement Conference 2014 on the topic How will retirement reform impact your retirement fund.
What is the new tax regime? Which tax regime is more beneficial? How to choose between old and new tax systems? What benefits need to be foregone for opting new regime?
Five broad principles guide AARP’s evaluation of tax options. Propos.pdfaswrd
Five broad principles guide AARP’s evaluation of tax options. Proposals to reform the tax code,
stimulate the economy, raise additional revenue for any purpose, or modify specific tax
provisions should take into account these principles. Equity—Revenue-raising methods should
consider people’s ability to pay and should, to the extent possible, achieve vertical and horizontal
equity. Taxation should be progressive, and people with comparable incomes should be taxed at
comparable rates. Taxes may also be related to benefits derived from government services.
Economic neutrality—Taxes should be as neutral as possible in their treatment of economic
activity and should not unduly encourage behavior undertaken simply to avoid taxation. Often
this can be achieved by a combination of a broad taxable base and a low tax rate. In addition
taxes should not unduly hinder economic growth, induce inflation, or discourage savings. Taxes
may be used to mitigate economic costs imposed on society that were not fully captured through
market prices. Administrative efficiency—Taxes should be simple for taxpayers to understand
and comply with, and as easy as possible to administer. The need to collect data on taxpayers and
enforce tax laws should be balanced against the protection of individual liberties and privacy.
Revenue—The tax system must produce sufficient revenue to pay for important national, state,
and local priorities and maintain fiscal stability. Stable and reliable public policies and programs
require adequate and consistent sources of revenue. Social and other policy goals—A balance
must be struck between using the tax system to address social policy goals (through such
measures as tax expenditures or earmarking revenue) and raising adequate revenues simply and
equitably. Sometimes the above principles conflict with each other. In these cases AARP may
weigh the relative importance of each of the key principles. AARP’s position on tax policies take
into account the net fiscal impact of a given policy proposal, not only its tax component.
Economic neutrality—Typically taxes create some inefficiencies by distorting economic choices
and thus people’s behavior in the market. One major goal of most tax reform proposals is to
reduce these distortions and encourage stronger economic growth. Proponents of consumption
taxes note that income taxes encourage consumption over saving. Integrating the individual and
corporate income taxes would reduce distortions that influence how businesses are organized and
how income is transferred from corporations to shareholders. By eliminating certain tax
deductions and other preferences, fundamental restructuring of the current income tax would also
improve the neutrality and efficiency of the tax system. Administrative efficiency—The degree
of administrative complexity depends greatly on the form of the tax. A VAT can have high
administrative costs because it increases the number of taxpayers and requires detailed record
ke.
The document discusses four key functions of public finance: allocation, distribution, stabilization, and growth. It also discusses principles for evaluating a good tax system, including revenue adequacy, stability, simplicity, tax neutrality, economic efficiency, and low administration and compliance costs. The document compares tax systems before and after reforms, noting the need to tailor reforms to a country's existing economic system and administrative capabilities.
The document discusses four key functions of public finance:
1) Allocation - Taxation is used to fund public goods like defense and infrastructure that are unprofitable to produce privately.
2) Redistribution - Redistribution through public expenditures is more effective than the tax system alone at redistributing wealth over time in a way that promotes growth.
3) Stabilization - Tax and spending policies aim to keep the actual income level close to potential to promote full employment and price stability.
4) Growth - The most important objective, policies aim to promote capital accumulation, education, and productivity to boost per capita incomes over time.
UK Income Tax Liabilities for Different Pension.pptxChaseBuchanan
Tax and pensions are two of the most complex factors for any individual planning to retire, access their lifetime savings, move abroad to another country, or make informed, intelligent decisions about the best way to manage their retirement assets.
Week 14_Lec 1 Introduction to Taxation.pptxnaseebkhan46
This document provides an overview of taxation. It defines tax as fees enforced by governments to fund activities. There are two broad categories of taxes: direct taxes on individuals/corporations like income tax, and indirect taxes on goods/services like sales tax. An ideal tax system has five characteristics - it is economically efficient, administratively simple, flexible, provides transparent political responsibility, and is fair. The document then discusses various effects of taxation like behavioral, financial, organizational, and general equilibrium effects. It also covers the concepts of distortionary versus nondistortionary taxation.
201504 BN74 PPI 2015 Election Briefing - PensionsSarah Luheshi
This document summarizes the positions of various UK political parties on pensions policy issues in advance of the 2015 general election. It discusses 11 topics related to pensions, including state pension age rises, additional pensioner benefits, pensions tax relief, and scheme governance. For each topic, the brief outlines the key policies or pledges of parties like the Conservatives, Labour, Liberal Democrats, Greens, and SNP. The document is intended to be a reference for understanding how different parties may affect future pensions policy.
01. introduction to taxation ICAB, KL, Study Manual
01. introduction to taxation ICAB, KL, Study Manual
01. introduction to taxation ICAB, KL, Study Manual
01. introduction to taxation ICAB, KL, Study Manual
A decumulation-only CDC pension scheme could operate in the UK based on recent legislative changes. The Pensions Schemes Act 2021 enabled CDC schemes, though the first approved scheme is a whole-of-life arrangement at Royal Mail. For decumulation CDC to work, key design features around benefit levels, indexation, and handling surplus/deficits would need to be determined. Issues like required membership scale, intergenerational fairness, and communication challenges would also need to be addressed.
Testimony -taxreform--pres budget commission5Urban Institute
The document discusses reforming taxes as part of overall budget reform. It outlines that tax reform involves dealing with the entire revenue side of the budget, including various taxes and tax subsidies that make up a significant portion of federal spending. The document also discusses the relationship between taxes and the budget, noting that most spending and tax programs are designed in a way that ensures permanent built-in growth, contributing to long-term budget deficits. It advocates for a comprehensive approach to tax and budget reform.
New Developments in Health & Welfare Plansbenefitexpress
The document highlights recent changes to laws and proposed regulations from various government agencies regarding employee benefits. It summarizes new IRS guidance on classifying vanpools and proposed EEOC regulations on wellness programs that expand incentives up to 30% of coverage costs. It also outlines new penalties for failing to comply with health reform reporting requirements and IRS guidance on implementing the Cadillac tax.
This document summarizes the issue of high-net-worth taxpayers becoming subject to the Alternative Minimum Tax (AMT) even when they do not have traditional preference items. It develops an analytical framework to predict the probability a taxpayer will be subject to the AMT based solely on the percentage of total income from long-term capital gains and the state tax rate. The key factors are that state taxes are deductible for regular tax but not AMT, and the declining difference between regular and AMT rates exacerbates this issue. The framework is then applied to examples comparing regular tax liability to AMT liability at different income levels and capital gains percentages.
The Florida State Retirement System (FRS) is the 4th largest public pension plan in the US but its funding assumptions are overly optimistic. FRS assumes a 7.75% annual return but has averaged only 3.3% since 2000. Florida currently contributes $5.5 billion annually to FRS but needs to contribute $11 billion to remain solvent, equating to $765 in additional taxes per household annually. Recalculating FRS liabilities using current interest rates shows the actuarial accrued liability is understated. If frozen today, assets could only pay pensions for 12-19 years depending on the discount rate used. Reforms are needed to improve the plan's solvency without reducing benefits.
1) The UK government is introducing changes to the pension system to address the issue that many people are not saving enough for retirement.
2) Starting in 2012, employers will be required to automatically enroll eligible employees into a workplace pension plan like NEST and contribute a minimum of 3% of earnings between £5,715-£38,185 annually.
3) Employers can choose their own pension scheme if it meets quality standards or they can use NEST, which charges an annual 0.3% management fee and initial 1.8% fee on contributions.
Similar to PPI Response to HMT consultation- strengethening the incentive to save Sept 2015 (20)
20151105 Retirement Funding Report commissioned by SMF finalSarah Luheshi
The document summarizes findings from modeling the potential retirement incomes and outcomes for five hypothetical individuals under different decumulation patterns. Key findings include:
- Individuals risk exhausting their pension pot during their lifetime if they withdraw unsustainably high amounts, becoming reliant on the state pension for income. Higher withdrawal rates and lower returns increase this risk.
- Individuals may have residual pension funds left at death if they withdraw too low amounts, missing an opportunity to maintain a higher quality of life during retirement.
- The risk to the government is greater when individuals exhaust their pension pot quickly and rely more on means-tested benefits, increasing long-term benefit costs to the state.
The document discusses how the postponement of reforms to long-term care financing in England from 2016 to 2020 will financially impact various hypothetical individuals. It finds that individuals with median or high earnings who own homes will receive substantially less from the state to contribute to their care costs due to the delay. This is because the lifetime cap on care costs, which was to be implemented in 2016, will now begin in 2020. As a result, these individuals' care costs will not exceed the cap before they pass away. In contrast, individuals with low earnings are unaffected by the postponement as the state was already funding most of their care costs.
The document discusses upcoming reforms to state pensions and long-term care in England. For state pensions, a New State Pension will replace current plans starting in 2016, aiming to provide an income just above the minimum guaranteed by Pension Credit. Long-term care reforms introducing a lifetime cap on individual care costs have been postponed until 2020. Hypothetical scenarios are used to illustrate how different individuals may be impacted by the interactions between pension and care reforms. Key findings are that home-owners and higher earners generally benefit from both sets of reforms, while low-income renters may lose means-tested benefits that offset pension gains. The combined reforms' long-term costs and impacts depend on future policy decisions.
02112015 Modelling Collective Defined Contribution SchemesSarah Luheshi
The document summarizes the results of modeling a Collective Defined Contribution (CDC) pension scheme compared to Defined Contribution (DC) schemes. The modeling found that in the long run, once mature, the CDC scheme produced higher replacement rates than DC schemes, requiring only a 10% contribution rate. In the short term without initial funding, the CDC scheme had similar outcomes to aggressive DC drawdown but was less likely to run out of funds. Key assumptions around funding levels and population size affected the CDC scheme's performance versus DC.
20151105 Retirement Funding Report commissioned by SMF finalSarah Luheshi
The document summarizes findings from modeling the potential retirement incomes and outcomes for five hypothetical individuals under different pension decumulation patterns. Key findings include:
- Individuals risk exhausting their pension pot during their lifetime if they withdraw funds at an unsustainable rate, leaving them reliant on the state pension for income. Higher withdrawal rates and lower investment returns increase this risk.
- Withdrawing funds too conservatively could leave individuals with a residual pension pot at death, missing an opportunity to maintain a higher quality of life during retirement.
- The risk to the government is greater when individuals exhaust their pension pot quickly and rely more on means-tested benefits later in life.
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This document summarizes key points from a briefing note on measuring retirement adequacy under new UK pension flexibilities. It discusses challenges with using replacement rates to measure adequacy when individuals can access savings flexibly. Though imperfect, replacement rates still indicate risk of inadequacy at a population level. The document also outlines opportunities in the new system, like considering all income/assets/debt together and linking savings to life events. Discussions could focus more positively on what retirees can do with income rather than just measuring adequacy.
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The document provides an overview of the UK pension system and changes that have impacted defined contribution pensions. It describes the state pension system and voluntary private pensions. It outlines risks in pension saving and how defined benefit, defined contribution, and hybrid schemes allocate risks differently. It also discusses demographic trends like increasing lifespans and market changes that have reduced defined benefit provision, leading to more people saving in defined contribution schemes.
201510 BN77 - adequacy under the new pension flexibilitiesSarah Luheshi
This document summarizes key points from a briefing note on measuring retirement adequacy under new UK pension flexibilities. It discusses challenges with using replacement rates to measure adequacy when individuals can access savings flexibly. Though imperfect, replacement rates still indicate risk of inadequacy at a population level. The document also outlines opportunities in the new system, like considering all income/assets/debt together and linking savings to life events. Discussions could focus more positively on what retirees can do with income rather than just measuring adequacy.
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This document discusses international approaches to financial education for retirement planning and decision-making. It summarizes examples from 5 countries:
1) Denmark provides simplified pension statements and found high satisfaction rates. This approach focuses on clear communication.
2) Sweden's Pensions Dashboard allows viewing all pension entitlements, though no specific evaluation was given.
3) New Zealand's Sorted website covers pensions alongside other topics, and saving rates increased after its launch.
4) The Netherlands holds annual Pensions Days for information, and scores highly on pension communication quality.
5) A US program auto-escalated pension contributions over time, significantly increasing employee savings rates.
The document evaluates different countries' approaches
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This document analyzes data from the Labour Force Survey to explore characteristics of employed individuals in the UK who do not meet the eligibility criteria for automatic enrollment in workplace pension schemes. Key findings include:
- Approximately 23% of employed individuals in the UK, or 4.8 million people, do not meet the eligibility criteria and are not currently saving in a pension.
- The most common reason for ineligibility is earning less than £10,000 per year, with 57% of ineligible individuals falling into this category.
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This document provides recommendations for improving financial planning through retirement. It discusses key issues such as consumers not always being rational or engaged in long-term planning. It recommends regulating based on actual consumer behavior rather than ideal behavior. Improving financial education and ensuring advice is available and affordable is emphasized. The roles of employers, government, regulators and industry in helping consumers better plan and manage finances in retirement are examined. Specific recommendations include reviewing financial education programs, promoting retirement advice in the workplace, clarifying guidance for advisers, and taking a holistic view of retirement needs in policymaking.
The document discusses the growth of Singapore's asset management industry since the Global Financial Crisis. It notes that total assets under management in Singapore grew from SGD 344 billion in 2002 to SGD 1.34 trillion in 2011, representing a compound annual growth rate of 14.6% during this period. The number of investment professionals in Singapore more than tripled over the same time frame. The document also examines challenges currently facing the industry such as increased regulation and competition. It provides an overview of external asset managers and asset management software providers active in Singapore.
PPI Response to HMT consultation- strengethening the incentive to save Sept 2015
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PENSIONS POLICY INSTITUTE
PPI Response to HMT consultation:
strengthening the incentive to save
Executive summary
1. The Pensions Policy Institute (PPI) promotes the study of pensions and
other provision for retirement and old age. The PPI is unique in the study
of pensions, as it is independent (no political bias or vested interest);
focused and expert in the field; and takes a long-term perspective across
all elements of the pension system.
The current system
2. The two main reasons why tax relief is given on pensions are to encourage
people to save for their retirement, and to make the tax system for pension
saving neutral by ensuring that people do not pay tax twice on the same
income.
3. The UK pension tax system is based on an EET system; the principle of
contributions being Exempt from tax, Investment returns being Exempt
from tax, and withdrawals from pension being Taxed.
4. However in practice the tax treatment of pensions in the UK is better than
that of other savings, including ISAs (which are sometimes described as
tax neutral). Pension saving in the UK is therefore tax advantaged.
5. The current distribution of tax relief benefits higher rate taxpayers more
than basic rate taxpayers. An important tax advantage accrues from the
fact that it is possible to withdraw a tax-free lump sum of up to 25% of the
pension value.
6. Many people are likely to experience lower tax rates in retirement than
during their working lives, meaning that they gain a further tax
advantage.
7. The net cost of tax relief, after allowing for tax paid on pensions in
payment, was estimated to be £21.2 billion in the 2013/14 tax year.
8. While basic rate taxpayers make 50% of the total pension contributions,
they benefit from 30% of pension tax relief. In contrast, 50% pension tax
relief goes to higher rate taxpayers and 20% goes to additional rate
taxpayers, these groups make 40% and 10% of the total contributions
respectively.
Radical reforms
9. This response considers a range of alternative radical reforms. Key
findings include:
· An EET system (retaining the tax free lump sum) with a single rate
between 20% and 40% has a redistributive effect, improving the
outcomes for basic rate taxpayers but worsening outcomes for higher
and additional rate taxpayers.
· Even though outcomes for higher and additional rate taxpayers are
lower in a single rate system than the current system, outcomes are
still better than in a purely tax neutral system, such as a pure TEE
system.
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· A pure TEE system without matching contributions is likely to reduce
pension outcomes, because, with tax being paid up front, none of the
pension is received tax free, and the tax paid is at the individual’s
marginal rate in work, rather than an average rate after retirement.
· Giving a matching contribution on a TEE system is similar to a single
rate EET system in the accumulation phase.
· A TEE system with significant matching contributions could improve
the outcomes for individuals.
· A single rate EET system of 30% relief would mean double taxation for
individuals who were Additional Rate taxpayers both when
contributing and in retirement.
· A single rate EET system of 25% or 20% would lead to individuals who
were Higher rate or Additional rate taxpayers in retirement facing
double taxation.
· No individuals who pay Basic rate tax in retirement would face double
taxation if the single rate in an EET tax system is at least equal to the
basic rate of income tax.
· An EET system with a single rate of slightly over 30% might be
implemented for around the same initial cost of tax relief as the current
system. A lower single rate would lead to lower costs to the exchequer.
· A pure TEE system will lead to an initial reduction in cost as the tax
relief on contributions falls to zero, however there will be a longer term
cost when the resulting pensions are paid out with no tax payable.
· A TEE system with matching contributions introduces up-front costs
to the exchequer in addition to the loss of future tax revenue on
pension payments.
· The distribution of tax relief would be equal to the distribution of
contributions under any system with a matching or single rate
element. This gives a more even distribution of relief than the current
marginal rate system
Savings incentives
10. The evidence surrounding the potential behavioural changes in response
to changes in tax relief is limited, and where there is evidence of changes
in behaviour in response to changes in rates of return, responses are
usually relatively small.
11. As highlighted by the lack of impact on pension saving of the current
system, providing a large fiscal incentive is not necessarily enough in itself
to change behaviour. If the incentive is not clear, well defined, or easily
understood, individuals cannot respond to it. Even if it is clear,
individuals will not necessarily respond in the way that might be
expected.
12. There is some evidence to suggest that such matching contributions do
affect behaviour, in the context of US pension saving and in other savings
policy areas in the UK. This might be easier with a single rate of matching
than, for example, in the current system where the match depends on the
tax band of the individual. Presenting the current system as a match could
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PENSIONS POLICY INSTITUTE
also lead to questions as to why higher earners receive a higher match, and
the technical explanations might be hard to get across to individuals.
The role of employers
13. The relative value of pension contributions to employers and employees
is likely to be an important determinant of behaviour. In the current
system, there is a clear financial benefit to both the employer and
employee of an employer making an employer pension contribution, in
part due to the tax relief and tax-free lump sum, and in part due to the
NIC relief on pension contributions. If there was no longer a clear financial
benefit, employers and employees might prefer other methods of
remuneration after meeting the statutory minimum requirements of
automatic enrolment.
Government contribution to saving
14. Even if individuals have only limited responses to incentives, tax relief can
still be seen within the automatic enrolment framework as a Government
contribution to pension saving. Moving to a single rate of tax relief
presented as a matched contribution would, depending on the rate used,
change the distribution of the Government contribution to pension saving
compared to the current system, leading to increased contributions and
therefore larger pension funds for basic rate taxpayers, and lower
contributions and therefore smaller pension funds for higher rate and
additional rate taxpayers. If matching contributions encourage higher
levels of participation in workplace pension saving, there may also be a
reduction in opting-out.
Coherence with other policies
15. It is important not to view tax relief in isolation from other parts of the UK
pension saving system, including recent reforms which will also have an
impact on levels of pension saving. These include:
· The introduction of the new State Pension for individuals reaching
state pension age from April 2016 onwards.
· The introduction of automatic enrolment, which is still only partially
rolled out and with very low contribution levels.
· Freedom and choice for DC pension saving.
Potential longer term and intergenerational consequences
16. A shift to TEE would bring forward tax collection, but lead to lower tax
receipts from pensions in payment in the future.
17. Demographic projections highlight that the proportion of the population
aged above state pension age is likely to increase significantly in the
future. If the majority of their income is tax free, at a time that age-related
Government expenditure will be under increasing pressure, a TEE system
suggests an increased tax burden on a relatively smaller working age
population.
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Introduction
The Pensions Policy Institute (PPI) promotes the study of pensions and other
provision for retirement and old age. The PPI is unique in the study of
pensions, as it is independent (no political bias or vested interest); focused and
expert in the field; and takes a long-term perspective across all elements of the
pension system. The PPI exists to contribute facts, analysis and commentary
to help all commentators and decision-makers to take informed policy
decisions on pensions and retirement provision.
1. This response will look in detail at the outcomes from the current
system of tax relief in the UK, to illustrate the counterfactual against
which any future reform should be considered. The response then
covers detailed analysis of the outcomes from radical reform
alternatives, and considers relevant other issues such as incentives,
transparency and savings behaviour, as well as briefly highlighting
potential long term and intergenerational impacts.
2. Although raising some of the relevant issues, this response does not cover
in detail any potential implementation issues where others will have better
evidence and experience of operating and administering systems.
The rationale for pension tax relief
3. There are two main reasons why tax relief is given on pension saving:
· Tax incentives are used to support retirement saving by encouraging
individuals to save for their retirement and employers to contribute
to pension schemes. The ultimate objective is to ensure that people
have enough money to live on once they have retired, limiting the
extent to which they rely on the state in retirement. In this way, tax
relief looks to compensate people for the fact that they cannot access
their money before a particular date and, when they are able to access
this money, it must be accessed in a particular way (for instance, they
must take it as an annuity or via a Capped Drawdown arrangement).
· Tax relief is also designed to help people defer consumption by
ensuring that people do not pay tax twice on the same income if they
save it to spend in the future; e.g. at the point where they earn the
income and when they receive the income in retirement. This centres
on the avoidance of double taxation. This is sometimes called a “tax
neutral” system, as it is neutral between spending and saving.
4. These two reasons are not mutually exclusive and are, in some cases,
complementary – avoiding double taxation may also incentivise pension
saving over other forms of saving. However, the relative importance
given to each of these reasons can lead to different conclusions about the
best structure for tax relief. An emphasis on avoiding double taxation
means that high earning individuals with high marginal tax rates can
receive large amounts of tax relief. However, an emphasis on
incentivising pension saving to ensure adequacy of retirement income
might suggest that limiting relief to high earners (who are more likely to
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save in the absence of incentives) and targeting incentives on low income
individuals could be the most beneficial approach in the long run.
How does pension tax relief currently work in the UK?
5. The regime for tax relief for private pensions has evolved over recent
years, but the main principles of tax relief have remained the same.
6. There are three stages of pension scheme saving where tax could be
payable or relieved. These are:
1. Contributions to the pension scheme
2. Investment returns on the subsequent pension fund
3. Payments out of the pension scheme
7. The UK has broadly adopted what is known as an EET system; the
principle of contributions being Exempt from tax, investment returns
being Exempt from tax, and withdrawal from pensions being Taxed. If a
pure EET approach were in place in the UK, this would allow for the
following:
Stage 1- Contributions
Contributions made by the individual to be paid from gross pay and not
subject to income tax. Contributions paid by the employer would also be
free of income tax.
Stage 2 - Investment
Growth and income within the pension fund to be free of capital gains tax
(CGT) and income tax.
Stage 3 - Payment
Benefits to those taking retirement income from a private pension to be
taxed at the individual’s marginal rate of income tax.
8. In practice, in the current UK system of pension tax relief there are some
variations to the application of the EET approach as follows:
9. In the investment stage, where the investment returns on the fund are
equity dividends, tax at the Corporation Tax rate has been paid on these
and cannot be reclaimed by the pension fund.
10. In the payment stage, up to 25% of the pension fund can be taken in the
form of a lump sum which is exempt from tax.
11. For these reasons, today’s system is better referred to as Eet, with the
second two letters in lower case to reflect the taxation of some investment
returns at the second stage and the opportunity to access tax-free benefits
at the third stage.
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12. Tax relief is generally at the individual’s marginal tax rate; however, even
where someone does not have income high enough to pay tax they can
benefit from basic rate tax relief on payments up to £2,880 a year.
Tax relief is limited in the UK
13. There are limits in place to tax relief on pensions. These restrict the
amount of relieved pension that can be built up every year and the total
value of the pension at retirement. These are known as the Annual
Allowance and the Lifetime Allowance respectively. Both of these have
been reduced significantly in recent years.
Annual Allowance
14. If the individual’s and employer’s contributions (for Defined Contribution
pension schemes), or the real increase in the value of the pension rights
(for Defined Benefit pension schemes), exceed the Annual Allowance, then
the excess is subject to a tax charge at the individual’s marginal tax rate.
The Annual Allowance is set at £40,000 for the 2015/16 tax year. Unused
Annual Allowance from the three previous tax years can be carried
forward and added to the Annual Allowance.
15. From 2016 the annual allowance will be reduced for those earning over
£150,000. Individuals with incomes between £150,000 and £210,000 would
have their Annual Allowance gradually reduced from £40,000 down to
£10,000, and individuals with incomes over £210,000 would have an
Annual Allowance of £10,000.
The Lifetime Allowance
16. The Lifetime Allowance limits the amount of pension saving that can be
built up over the course of an individual’s life for tax relief purposes. This
is usually assessed when a pension comes into payment. If the value of
the pension benefit at retirement is over the Lifetime Allowance tax is
payable at the 25% rate on the excess if it is taken as an annuity (on which
income tax is then payable at the individual’s marginal rate) and at the
55% rate if it is taken as a lump sum (which is then payable tax-free). The
current life time allowance is £1.25 million from 2014-15 onwards.1 Both
the Annual and Lifetime Allowances have been reduced incrementally
over time.
17. While, in theory, the UK pension tax relief system allows taxation to be
smoothed over a lifetime, there are some irregularities in the pension
system. These arise mainly from timing issues and fiscal policy. Over their
lifetime individuals are likely to experience changes to levels of their own
personal income and government changes to allowances and tax rates.
However, many people are likely to experience lower incomes and tax
rates in retirement than in their working lives. For example, some
1 Protection exists to allow individuals who would have built up pension saving in excess of the Lifetime
Allowance at the time it was introduced to avoid tax charges. More information is available at
www.hmrc.gov.uk/pensionschemes/pension-savings-la.htm#1
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individuals will move from being higher rate taxpayers at some point
during their working lives to basic rate taxpayers in retirement.
Tax relief is currently delivered through two different systems
18. The actual amount of tax relief on pension contributions varies depending
on whether contributions are paid from income before income tax is
deducted, or after.
19. Contributions taken from salary before the deduction of income tax reduce
the taxable income of an employee. They therefore implicitly attract tax
relief at the employee’s marginal rate. Pension schemes that receive
employer contributions, including all Defined Benefit schemes, can be set
up in this way. This is sometimes called a net pay arrangement. If an
individual does not pay income tax, they receive no tax relief in a net pay
arrangement.
20. Pension schemes that receive contributions from post-tax pay, such as
personal pensions, are also eligible for tax relief but it is through a more
explicit process. The pension fund will claim tax relief on all contributions
at the basic rate from the government. Further tax relief for higher and
additional rate taxpayers must be reclaimed by the individual in a tax
return. This is known as Relief at Source.
How much does pension tax relief cost?
21. Tax relief has a cost and there are different ways to estimate this cost. One
way of calculating the cost is the ‘present value’ approach. This calculates
the cost over the lifetime of individuals, taking into account the amount
paid out in relief on contributions, relief on investment income and tax
paid on pensions in payment over individuals’ lifetimes. However, this
cost can be hard to measure or project, as it depends on individual
decisions as well as changing tax rates and systems.
22. HM Revenue and Customs (HMRC) uses a cash flow approach to estimate
the annual amount of tax revenue foregone because of pension tax relief
on private pension contributions by employers, employees, and the self-
employed.
23. In 2013/14 the cost of tax relief amounted to £27.0 billion (table 1). In
addition, relief given on investment returns is estimated to cost another
£7.3 billion, bringing the total gross cost of pension tax relief to £35 billion.
24. Offset against this amount is the amount of tax collected on private
pensions in payment, £13.1 billion, to reach an estimate of the net tax relief
cost. HMRC estimated this cost to be around £21.2 billion.2
2 HMRC PEN6 (2015)
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25. However, if the Government phased out tax relief on pension
contributions this would not necessarily result in extra revenue of the full
cost of tax relief as, for instance, some pension savings would be diverted
to other tax-advantaged savings account or spent.3
Table 1: Estimated costs of tax relief on private pensions (2013/14)4
Tax relief on: £ millions
Relief paid on contributions into schemes:
Employees’ contributions to occupational pension schemes £4,300
Employers’ contributions to occupational pension schemes £17,100
Employees’ contributions to personal pension schemes £1,9000
Employers’ contributions to personal pension schemes £3,100
Contributions to personal pensions by the self-employed £600
Total tax relief on contributions £27,000
Relief paid on investment returns:
Investment income of funds £7,300
Total tax relief on private pensions £34,300
Less tax liable on:
Pension payments £13,100
Total tax received £13,100
NET TAX RELIEF COST £21,200
26. There is also a cost of relief from National Insurance contributions on
employers’ pension contributions worth £14.0 billion in 2013/14.
27. Some employers offer what are known as ‘salary sacrifice’ schemes to take
further advantage of this relief. Under these arrangements, an employee
will agree a reduction in salary, while the same amount is then paid as an
employer pension contribution. This can increase the overall level of
remuneration, due to a reduction in the level of NI paid by both the
employer and employee.
28. There is no comprehensive, robust evidence as to how many employers
offer this scheme, how many employees take advantage of it or how much
is foregone in NI relief.
29. The cost of pension tax relief has been increasing in recent years. The gross
cost before taking into account tax paid on pensions in payment increased
from £29.4 billion in 2008/9 to £34.3 billion in 2013/14, despite reductions
in both annual and lifetime allowances.5
30. More recent developments are likely to affect the cost of tax relief in
different ways. Further reductions to the Annual and Lifetime
Allowances, and the proposed changes to the Annual Allowance for high
earners from 2016 will reduce the cost of tax relief. In contrast, the
3 PPI (2004)
4 HMRC PEN6 (2015)
5 HMRC PEN6 (2015)
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introduction of auto-enrolment is likely to result in more people paying
into pensions. Under automatic enrolment, the total amount paid in, and
the corresponding tax relief, is likely to increase all other things being
equal.
The impact of the UK pension tax system varies between individuals
31. The pension tax system enables individuals to benefit from the smoothing
of taxation over their lifetime. While their contributions and returns on
their investment are largely tax-free, the state reclaims the tax foregone
through the taxation of part of private pension income (after allowing for
the 25% tax-free lump sum), though this is sometimes at a lower rate of
taxation. This regime means that, relative to other types of saving such as
ISAs, high levels of financial benefit can accrue to the individual through
tax relief on pension contributions.
32. The following analysis shows the impact of the current tax relief system
on the amount of pension tax relief received by four different types of
taxpayer:
· A non-taxpayer
· A basic rate taxpayer
· An individual who pays higher rate tax both during their working life
and in retirement
· An individual who pays higher rate tax during their working life and
basic rate tax in retirement
33. Calculations are based on a payment of £1,000 into a pension by an
individual aged 40 which remains invested until state pension age,
assumed to be 67 in line with current legislation.
34. These calculations compare the amount that would be received if the same
contribution were paid into a pension, into an ISA and into a normal
savings account. Where someone pays into an ISA, their contributions are
made out of taxed income and subsequently any growth in the fund and
income withdrawn from the fund is exempt from tax. In theory this is
known as a TEE regime, although in the UK as in the pension tax relief
system, the investment stage is not completely exempt from taxation and
is best described as TeE. In contrast, it is assumed in these calculations
that any growth or income in a normal savings account is fully taxed – this
is known as a TTE regime.
35. To isolate the impact of tax relief, it is assumed that both the ISA and the
savings account would achieve the same investment return before tax as
the pension fund. For simplicity the middle ‘e’ in both the ISA and the
pension has been treated as ‘E’; investment returns are assumed to be free
of tax. This does not affect the relative difference between the different
types of saving.
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PENSIONS POLICY INSTITUTE
36. A TEE regime, such as an ISA, is often used to describe a tax-neutral
system, in that it avoids double taxation.6 Therefore, where the UK
pension tax relief system provides a better outcome than an ISA, this is tax
beneficial rather than tax neutral.
37. Chart 1 shows what each type of taxpayer would receive, net of tax, under
different regimes.
Chart 17
PPI
PENSIONSPOLICY INSTITUTE
Pension saving is tax-
advantaged compared to ISAs
£3,900
£2,900
£2,100 £2,100
£0
£1,000
£1,800 £1,800
£1,000
£250
£650
£1,650
£0
£1,000
£2,000
£3,000
£4,000
£5,000
£6,000
Non-taxpayer Basic rate taxpayer Higher rate taxpayer Higher rate taxpayer
(basic rate in
retirement)
Savings account ISA Current system
Capitalised value of income and lump sum for a £1,000 payment into a
pension fund at age 40 which remains invested until State Pension Age
Normal savings account
38. If the £1,000 payment is paid into a savings account, of all of the groups of
individuals, non-taxpayers and basic rate taxpayers would receive the
largest capitalised value. This is because non-taxpayers do not pay tax on
any interest from a normal savings account and a basic rate taxpayer pays
tax at 20%. While non-taxpayers would receive £3,900, basic rate
taxpayers would receive £2,900 and higher rate taxpayers would receive
£2,100 irrespective of their tax rate in retirement.
6 IFS (2011) Mirrlees Review
7 Based on a one-off payment of £1,000, a nominal rate of return of 6% per annum and an Annual
Management Charge of 0.77%. Further information is available from PPI (2013) Tax relief for pension saving
in the UK.
11. Page 11 of 28
PENSIONS POLICY INSTITUTE
ISA
39. In contrast, all individuals would achieve the same capitalised value of
£3,900 under the tax neutral ISA regime. This is because interest on an ISA
is tax-free for all types of taxpayers.
Pensions
40. Both taxpayers, regardless of their marginal tax rate, and non-taxpayers
benefit from the current system relative to ISAs and savings accounts.
Non-taxpayers benefit from the current system because they can receive
basic rate tax relief on contributions of up to £2,880 per year. The
capitalised value of the pension to the non-taxpayer is £4,900, which is
£1,000 (34%) higher than the ISA. For taxpayers, the main tax advantage
of a pension compared to an ISA comes from the tax-free lump sum. This
is higher for higher rate taxpayers than for basic rate taxpayers, as they
would have had to pay tax at the higher rate if the lump sum were taxable.
The capitalised value of the pension to the basic rate taxpayer is £4,150,
which is £250 (6%) higher than the ISA. The capitalised value of the
pension to the higher rate taxpayer is £4,550, which is £650 (17%) higher
than the ISA.
41. A further advantage exists for the individual who pays higher rate tax
when working, but is a basic rate taxpayer in retirement. This is because
they receive relief on contributions at the higher rate of tax, but only pay
tax at the basic rate. The capitalised value of the pension to this taxpayer
is £5,550, £1,650 (42%) higher than the ISA.
42. As such, the current distribution of tax relief benefits higher rate taxpayers
more than basic rate taxpayers, particularly those people who pay higher
rate tax during at least part of their working lives, benefitting from higher
rate tax relief, and go on to pay basic rate tax in retirement.
43. An important tax advantage accrues from the fact that it is possible to
withdraw a tax-free lump sum of up to 25% of the pension value. While
there are no specific figures regarding the uptake of this option and use of
lump sums, research suggests that around 80% of those drawing a
company or private pension in 2011 took a lump sum from their fund at
retirement8. Of these people, over half of those who took a lump sum put
some of the money in a savings account, while just over a quarter invested
in stocks, shares or investment trusts.9 Other reported uses of tax-free
lump sums include paying off mortgages or other debts.10
8 www.pru.co.uk/pdf/presscenter/ret_inc_worries_lump_sum_regrets.pdf
9 www.pru.co.uk/pdf/presscenter/ret_inc_worries_lump_sum_regrets.pdf
10 www.scottishwidows.co.uk/documents/generic/2008_grandparents_travel_delayed_debt.pdf
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PENSIONS POLICY INSTITUTE
Avoidance of double taxation
44. The current pension tax relief system aims to ensure that pension saving
is at least tax neutral (people do not pay tax twice on the same income).
The 25% tax-free lump sum means that the pension tax relief system is
actually tax advantaged. In this respect, all individuals with pension
saving receive a tax advantage. In addition, the system works so that some
people gain a further tax advantage from pension saving:
· Where people receive tax relief on contributions at the higher rate and
pay tax on a private pension in retirement at the basic rate, they gain
a greater tax advantage.
· Similarly, people who receive tax relief on contributions at the basic
rate and do not pay tax in retirement receive a tax advantage.
45. It is difficult to know how many people benefit in either of these ways.
Table 2 shows the number of people in 2012/13 who paid basic, higher
and additional rate tax.11 In 2010/11, higher rate tax was paid by around
2 million (10%) taxpayers whose largest source of income was from
employment and by around 200,000 (4%) of taxpayers whose large source
of income was from a pension. The percentage of people paying higher
rate tax has been increasing, and in future more individuals are likely to
pay higher rate tax, both while working and in retirement as the income
at which higher rate tax is payable has been falling relative to average
earnings. Previous PPI calculations suggest that the proportion of
pensioners paying higher rate tax could increase to around 9% of
pensioners by 2026, assuming that thresholds are increased broadly in line
with prices.12
Table 2: Numbers of taxpayers by tax rate and main source of income,
2012/1313
Main source of
income from
employment
(thousands)
Main source of
income from pension
(thousands)
Basic rate taxpayers 18,000 5,210
Higher rate taxpayers 2,760 293
Additional rate
Taxpayers
185 9
11 HMRC table 3.4
12 Assuming that the Personal Allowance increase in line with CPI, following the increase to £10,000 in
2014/15 and that the basic rate band increases in line with RPI from 2016/17 following planned increases
of higher rate threshold in 2014/15 and 2015/16. See HMRC, Income tax higher rate threshold for 2014-15 and
HMRC Income tax personal allowance for those born after 5 April 1948 and basic rate limit for 2014-15
13 HMRC, table 3.4
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PENSIONS POLICY INSTITUTE
46. Fiscal drag, whereby an increasing number of people are pulled into
paying higher rate tax, means that higher numbers of people will pay
higher rate tax during retirement and also during their working lives.
However, it is likely that there will remain a group of people who pay
higher rate tax at some point during their working lives and basic rate tax
in retirement. If this pattern persists, this suggests that a large proportion
of those people currently paying higher rate tax on their earnings, and
benefitting from higher rate tax relief, may not pay higher rate tax on their
pension income.
Does current tax relief encourage pension saving?
47. Evidence around the effectiveness of tax incentives in encouraging
pension saving is limited. However the literature enables some
understanding around the effectiveness of tax relief as well as reasons why
tax relief is not effective. There are some issues which relate directly to the
tax relief system:
· Lack of understanding around tax relief.
· People redirect money from savings into a pension, rather than
increase their savings overall.
· Higher earners, who may be more likely to save, are more likely to
respond to incentives.
· Tax relief has not led to enough saving to close the ‘Savings Gap’.
48. There are some more general barriers to pension saving, which an effective
incentive system would need to overcome:
· People have insufficient income to make pension savings.
· Lack of understanding around pensions.
· Issues related to the current design and delivery of pensions.
· Inertia.
49. The current system of tax relief is very good at avoiding double taxation,
and in fact provides a very tax favourable system for many. However,
despite the significant fiscal incentives offered by the system, it has not
been effective at increasing pension savings except at higher earnings
levels. The evidence also suggests that where pension saving has been
increased it has at least in part been due to redirected savings rather than
new saving. Much of the cost of the current system may therefore be as a
Government contribution towards pension saving rather than as a savings
incentive.
50. This is not necessarily a bad feature in a system, and is broadly consistent
with the principles of the Government making a contribution to automatic
enrolment. However, if tax relief is a directed towards individuals who
would already be saving rather being used to encourage new saving, the
distribution of tax relief becomes a relevant consideration.
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PENSIONS POLICY INSTITUTE
How is pension tax relief distributed?
51. Tax relief benefits higher earners disproportionately, with higher earning
employees receiving the majority of the tax relief from the government.
However, this partly reflects the fact that higher and additional rate
taxpayers pay a larger proportion of tax revenues (Chart 2).
Chart 2 14
0%
5%
10%
15%
20%
25%
30%
35%
40%
Less
than
£20k
£20k to
£30k
£30k to
£50k
£50k to
£70k
£70k to
£100k
£100k to
£150k
£150k to
£200k
200k to
300k
£300k to
£500k
Over
£500k
Marginal tax relief Contributions
Proportionoftaxrelief
received
Pension tax relief is unevenly
distributed in the current
system
Distribution of tax relief by salary band in 2012/13 under the
current marginal rate system compared with a flat rate system
Salary band
52. In the current system, basic rate taxpayers currently make 49% of the
contributions, but receive 29% of tax relief. Higher rate taxpayers make
42% of contributions but receive 56% of tax relief. Additional rate
taxpayers make 9% of contributions but receive 15% of tax relief.
Radical reforms
53. The Consultation mentions two potential radical reforms – a move to a flat
rate of tax relief and a move to a TEE system (as is used for ISA’s) - as well
as more minor changes to the current system. In the next part of this
response analysis is presented to consider the potential impacts of the
radical reforms on individuals, on costs, and on savings incentives.
54. This response does not cover analysis of minor reforms to the current
system. Many of the issues arising from the current system, such as
complexity and lack of understanding undermining the value of tax relief
as an incentive to save in a pension, would not be addressed by minor
reforms to the annual and lifetime allowances. There is also a lack of data
14 PPI (2015) Comparison of pension outcomes under EET and TEE tax treatment
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PENSIONS POLICY INSTITUTE
in the public domain that could be used to inform the potential impact of
changes in the annual, and in particular, the lifetime allowance.
55. The PPI has produced a number of different reports and analysis which
consider the impact of alternative radical reforms of pensions tax relief in
the UK.19 To help inform this consultation, the PPI has undertaken analysis
on behalf of the ABI, and the main findings of that analysis is included in
this response.20
56. The reforms considered include:
• Maintain the status quo (i.e. a EET system with tax paid in retirement
at the individuals marginal rate, but with access to 25% of the fund tax
free);
• A reformed system similar to the current system but without the
option to take any cash as tax free
• A single rate of tax relief at 20%, 25%, 30% and 33%;
• A TEE system with no matching payment;
• A TEE system with matching payments between 10 and 50 percent.
57. The analysis compares:
· The outcomes for individuals under the alternative options to the
outcomes under the current system
· The outcomes for individuals to a tax neutral system
· The initial first year costs of alternative systems, based on the current
pattern of pension contributions
· The distribution of tax relief compared to the current system
58. The analysis initially considers the value of a £1,000 pension contribution
made at age 25 under alternative systems of tax relief, for individuals
paying different rates of tax when the contribution is made and when the
pension comes into payment. The main findings of the analysis are that
(Table 3):
· An EET system (retaining the tax free lump sum) with a single rate
between 20% and 40% has a redistributive effect, improving the
outcomes for basic rate taxpayers but worsening outcomes for higher
and additional rate taxpayers.
· Even though outcomes for higher and additional rate taxpayers are
lower in a single rate system than the current system, outcomes are still
better than in a purely tax neutral system, such as a pure TEE system.
· A pure TEE system without matching contributions is likely to reduce
pension outcomes, because, with tax being paid up front, none of the
pension is received tax free, and the tax paid is at the individual’s
marginal rate in work, rather than an average rate after retirement.
· Giving a matching contribution on a TEE system is similar to a flat rate
EET system in the accumulation phase.
19 For example PPI (2013) Tax relief for pension saving in the UK
20 PPI (2015) Comparison of pension outcomes under EET and TEE tax treatment
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PENSIONS POLICY INSTITUTE
· A TEE system with significant matching contributions could improve
the outcomes for individuals.
59. If a pure TEE system is taken to represent a “tax neutral” system which
avoids double taxation, there are some systems for some tax payers that
would result in some double taxation:
· A single rate EET tax system of 30% relief would mean double
taxation for individuals who were Additional Rate taxpayers both
when contributing and in retirement.
· A single rate EET tax system of 25% or 20% would lead to individuals
who were Higher rate or Additional rate taxpayers in retirement
facing double taxation.
· No individuals who pay Basic rate tax in retirement would face
double taxation under any of the single rate EET tax system options
considered.
60. Of course individuals are likely to be in different tax positions at different
points of their life. Further analysis considers individuals at different ages
and earnings levels (20 year olds earning £15,000 and 40 year olds earning
£40,000) with different future career paths. A similar pattern of results to
those seen for a single contribution is seen for continuous contributions,
which is likely to be more representative of the real life impact on
individuals. Analysis that considers different patterns of work and
earnings, highlights that (Tables 4 and 5):
· Individuals who are basic rate taxpayers through their working life
tend to do better under a single rate EET system which offers tax relief
at greater than 20%.
· Those who have significant periods as higher rate taxpayers, including
those who may have started as basic rate taxpayers, do less well under
TEE systems or the single rate EET system than in the current system,
requiring a high matching contribution or rate of tax-relief rate to
maintain the value under the current system.
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PENSIONS POLICY INSTITUTE
Table 3: Taxed Fund value of 25 year olds under an EET and TEE system as a result of a £1,000 contribution21
Tax Position
(pre/post)
Current
EET
system
TEE
system
Flat rate
20%
relief
Flat rate
25%
relief
Flat rate
30%
relief
Flat rate
33%
relief
TEE
10%
match
TEE
20%
match
TEE
30%
match
TEE
40%
match
TEE 50%
match
Non/Non £1,680 £1,344 £1,680 £1,792 £1,920 £2,006 £1,479 £1,613 £1,748 £1,882 £2,016
Basic/Non £1,680 £1,344 £1,680 £1,792 £1,920 £2,006 £1,479 £1,613 £1,748 £1,882 £2,016
Basic/Basic £1,428 £1,344 £1,428 £1,523 £1,632 £1,705 £1,479 £1,613 £1,748 £1,882 £2,016
Higher/Basic £1,904 £1,344 £1,428 £1,523 £1,632 £1,705 £1,479 £1,613 £1,748 £1,882 £2,016
Higher/Higher £1,568 £1,344 £1,176 £1,255 £1,344 £1,404 £1,479 £1,613 £1,748 £1,882 £2,016
Additional/Higher £1,711 £1,344 £1,176 £1,255 £1,344 £1,404 £1,479 £1,613 £1,748 £1,882 £2,016
Additional/Additional £1,619 £1,344 £1,113 £1,187 £1,272 £1,329 £1,479 £1,613 £1,748 £1,882 £2,016
Key < 95% of current Between 95% and 105% of current > 105% of current
21 PPI calculations, key to colours in the table. The taxed fund value is the amount of the contribution plus tax relief, after investment returns up to retirement, less tax payable at the individuals post-
retirement marginal rate allowing for 25% being tax free (when taken as a lump sum). This is presented in earnings terms.
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PENSIONS POLICY INSTITUTE
Table 4: Taxed pension value for 20 year olds earning £15,000 in 2015 who work throughout their future working life under an EET
and TEE system22
Current
EET
system
TEE
system
Flat rate
20%
relief
Flat rate
25%
relief
Flat rate
30%
relief
Flat rate
33%
relief
TEE
10%
match
TEE
20%
match
TEE
30%
match
TEE
40%
match
TEE
50%
match
Full working
life
£46,200 £37,872 £46,200 £48,987 £52,172 £54,311 £41,659 £45,446 £49,233 £53,020 £56,808
Career break for
kids
£36,873 £29,669 £36,873 £39,177 £41,764 £43,477 £32,635 £35,602 £38,569 £41,536 £44,503
Career break to
care
£38,081 £30,701 £38,081 £40,443 £43,096 £44,855 £33,771 £36,841 £39,911 £42,981 £46,051
Key < 95% of current Between 95% and 105% of current > 105% of current
Table 5: Taxed pension value for 40 year olds earning £40,000 in 2015 who work throughout their future working life under an EET
and TEE system and annuitise in retirement
Current
system
TEE Flat rate
20%
relief
Flat rate
25%
relief
Flat rate
30%
relief
Flat rate
33%
relief
TEE
10%
match
TEE
20%
match
TEE
30%
match
TEE
40%
match
TEE
50%
match
Full working
life
£78,923 £73,358 £78,923 £83,773 £89,316 £93,038 £73,905 £80,623 £87,342 £94,061 £100,779
Career break
to care
£53,059 £49,466 £53,059 £56,256 £59,859 £62,262 £47,721 £52,059 £56,397 £60,736 £65,074
Higher salary
growth
£93,135 £85,488 £76,408 £81,090 £86,442 £90,036 £71,350 £77,836 £84,323 £90,809 £97,296
Key < 95% of current Between 95% and 105% of current > 105% of current
22 See PPI (2015) Comparison of pension outcomes under EET and TEE tax treatment for further details of the individuals modelled here (Career break for kids is a career break between age 30 and
40, career break to care is a career break between ages 50 and 60, higher salary growth is an additional 1% of earnings growth on top of the standard earnings growth assumption, and other
modelled examples including 40 year olds earning £60,000)
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PENSIONS POLICY INSTITUTE
61. The different tax relief systems would have different impacts on the cost
to the exchequer of tax relief. In terms of the current 1 year cost of tax relief
(Chart 3):
· An EET system with a single rate of slightly over 30% might be
implemented for around the same initial cost of tax relief as the current
system. A lower single rate would lead to lower costs to the exchequer.
· A pure TEE system will lead to an initial reduction in cost as the tax
relief on contributions falls to zero, however there will be a longer term
cost when the resulting pensions are paid out with no tax payable.
· A TEE system with matching contributions introduces up-front costs
to the exchequer in addition to the loss of future tax revenue on
pension payments.
· For those who would be eligible for means tested benefits, those
benefits may be able to offset some of the loss in a switch from the
current system to a pure TEE with no matching contributions.
However that would increase the cost on the government of providing
means tested benefits.
62. The longer term costs of a radical reform to the system are highly
uncertain, and would depend to a large extent as to how individuals and
employers changed behaviour in response to changes in relative
incentives.
63. Although a TEE system would have an initial positive impact on the
Exchequer by increasing the amount of tax collected, some of this could be
offset by funding the matching contributions that provide the incentive to
save. In future years, however, the Exchequer would collect less revenue
than under the current system as pensions that have been accumulated
with taxed contributions come into payment tax free. The future impact
will therefore depend on the balance of contributions in to payments out.
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PENSIONS POLICY INSTITUTE
Chart 3 25
£0
£5
£10
£15
£20
£25
£30
£35
Current
system
Flat rate
20%
relief
Flat rate
25%
relief
Flat rate
30%
relief
Flat rate
33%
relief
TEE TEE
10%
match
TEE
20%
match
TEE
30%
match
TEE
40%
match
TEE
50%
match
Cost on employer contributions Cost on employee contributions
AnnualcosttotheExchequer£bn(2012/13)
Different systems have
different Exchequer costs
Cost to the Exchequer (based on 2012/13 costs and distributions) under
various tax relief systems
The impact of automatic enrolment
64. The estimates of costs to the Exchequer in this response are based on the
latest available data from HMT, which is for 2012/13. This will only cover
the first few months of automatic enrolment, which will significantly
increase the number of individuals making pension contributions, and
over time increase the cost of pension tax relief (all other things being
equal).
65. Automatic enrolment will also change the distribution of pensions tax
relief, as the majority of people being automatically enrolled are likely to
have lower rather than higher earnings. This means that, over time, the
“break even” level of a single rate of tax relief will reduce. A broad initial
analysis of the potential tax relief paid out as a result of the additional
pension contributions arising from automatic enrolment suggests that the
breakeven level on these contributions could be just below 25% (Chart 4).
25 PPI (2015) Comparison of pension outcomes under EET and TEE tax treatment
21. Page 21 of 28
PENSIONS POLICY INSTITUTE
Chart 426
£0
£1
£2
£3
£4
£5
£6
Current
system
Flat rate
20%
relief
Flat rate
25%
relief
Flat rate
30%
relief
Flat rate
33%
relief
TEE TEE
10%
match
TEE
20%
match
TEE
30%
match
TEE
40%
match
TEE
50%
match
Cost on employer contributions Cost on employee contributions
AnnualcosttotheExchequer£bn(2012/13)
The break even single rate is
lower for automatic
enrolment contributions
Cost to the Exchequer (based on estimated automatic enrolment
contributions) under various tax relief systems
66. The distribution of tax relief would be equal to the distribution of
contributions under any system with a matching or single rate element.
This gives a more even distribution of relief than the current marginal rate
system (Chart 5).
26 PPI (2015) Comparison of pension outcomes under EET and TEE tax treatment
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PENSIONS POLICY INSTITUTE
Chart 5 27
0%
5%
10%
15%
20%
25%
30%
35%
40%
Less
than
£20k
£20k to
£30k
£30k to
£50k
£50k to
£70k
£70k to
£100k
£100k to
£150k
£150k to
£200k
200k to
300k
£300k to
£500k
Over
£500k
Marginal tax relief Flat rate tax relief
Proportionoftaxrelief
received
Moving to single rate of tax relief or
matching contributions shifts the
distribution of tax relief to the lower paid
Distribution of tax relief by salary band in 2012/13 under the current
marginal rate system compared with a flat rate system
Salary band
67. This analysis is based on the current distribution of pension contributions.
But one of the main aims of the pensions tax relief system is to change
behaviour. If behaviour changes, this would change the distribution and
cost of tax reliefs. However, it is not clear how behaviour might change in
response to such radical changes in the tax relief system.
Incentives
68. If the system of pensions tax relief changes we might expect behaviour to
change in a number of ways:
· As the Government contribution to pensions changes, the rate of
return on individuals’ own pension contributions will change. This
could lead to individuals changing their behaviour.
· It may affect perceptions and ease of use of the pension tax relief
system. This may affect individual’s interaction with the system (for
instance, if they are required to pay extra tax at the end of the year).
· It may affect employers through administrative complexity and cost,
and indirectly through their employees’ perception of value of
pensions.
69. The value of a contribution increases if an individual is offered more tax
relief, leading to a larger pension fund at retirement. If less tax relief is
offered, the pension fund at retirement is smaller. Consequently, pension
saving will, in theory, become more or less attractive to different income
27 PPI (2015) Comparison of pension outcomes under EET and TEE tax treatment
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PENSIONS POLICY INSTITUTE
groups, potentially leading to an increase or decrease in the amount of
contributions made.
70. Restriction of tax relief below marginal rates may lead those people who
currently receive higher rate tax relief to divert their savings from
pensions. A single rate of tax relief above a marginal rate may incentivise
lower and middle earners to make more pension saving.
71. However, the evidence surrounding the potential behavioural changes in
response to changes in tax relief is limited, and where there is evidence of
changes in behaviour in response to changes in rates of return, responses
are usually relatively small. 28
72. In considering how individuals might respond, it is also important to
consider the right counterfactual for individual comparisons and
incentives. So even if some reforms – such as a single rate of tax relief lower
than an individual’s marginal tax rate – is less generous than the current
system, it may still offer more generous tax treatment than is available
through other forms of savings.
Transparency
73. As highlighted by the lack of impact on pension saving of the current
system, providing a large fiscal incentive is not necessarily enough in itself
to change behaviour. If the incentive is not clear, well defined, or easily
understood, individuals cannot respond to it. Even if it is clear,
individuals will not necessarily respond in the way that might be
expected.
74. One presentation option put forward that would work with the current
system or the radical alternatives, is to use the idea of a matching
contribution. For example, a presentation of “Contribute X and receive a
contribution of Y from the Government” might be clearer and therefore
more likely to affect behaviour than “Receive tax relief at X per cent / the
Basic Rate”.
75. This has been used in the presentation of automatic enrolment, although
the message has been diluted in net pay arrangements, where a 5%
contribution is taken from gross pay and the 1% Government contribution
manifests as lower income tax and higher take home pay, which is not
necessarily clear to employees. A match is more likely to be effective
where it is obvious and makes a positive impact on the amount saved
rather than reducing the amount of income tax paid where an individual
is not aware of how much less income tax is being paid (if they are aware
of the reduction at all).
28 For example see Annex 6 in PPI (2013) Tax relief for pension saving in the UK
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76. There is some evidence to suggest that such matching contributions do
affect behaviour, in the context of US pension saving and in other savings
policy areas in the UK. For example:
· In the early 2000s the UK Government ran extensive pilot schemes for
a Savings Gateway – a short term saving scheme that offered differing
levels of matched contributions from the Government (ranging from
20p for every £1 saved to £1 for every £1 saved). Evidence suggests that
the matching led to increased participation in the plan. However, there
was little evidence to suggest that this was new saving, as there was
little impact on overall saving or lower spending.29
· In the US many employers offer matching contributions into 401(k)
plans. A number of research studies have found evidence that
matching contributions can increase participation in 401(k) plans, but
that a larger match does not necessarily lead to higher contributions
(and if the match is too large it could lead to lower individual
contributions).30
77. However, this might be easier with a single rate of matching than, for
example, in the current system where the match depends on the tax band
of the individual. Presenting the current system as a match could also lead
to questions as to why higher earners receive a higher match, and the
technical explanations might be hard to get across to individuals.
Employer incentives
78. As well as direct impact of pensions tax relief on individuals there may
also be indirect effects, not least through employers. Automatic enrolment
has reinforced the workplace as the main delivery channel for pension
saving, and so the behaviour of employers will be very important in
determining future levels of pension saving.
79. Even after controlling for other characteristics, the presence of an
employer pension contribution is the most significant driver in employee
pension saving.31
80. Concerns have been raised that recent changes to limit tax relief have led
to lower levels of engagement with pension saving among senior
executives, which in turn has led to lower employer engagement with
pensions where the senior executives have less personal interest in the
scheme used to provide pensions for the majority of the workforce. This
has long been a concern as the relative value of pensions for senior staff
has been eroded by successive tax reforms, and although there is anecdotal
evidence of senior staff leaving pension schemes and taking other forms
of remuneration in response to pensions tax relief changes, there has not
29 Harvey et al (2007) Final Evaluation of the Saving Gateway 2 Pilot: Main Report
30 See for example Adams, Salisbury and VanDerhei Matching Contributions in 401(k) Plans in the United States
in Hinz, Holzmann, Tuesta and Takayama (2012) Matching Contributions for Pensions: A Review of
International Experience
31 Strategic Society Centre (2012) Who saves for retirement?
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been any detailed research which provides evidence of the full impact on
overall pension provision that this has had.
81. It is also not clear whether any behaviour changes among senior managers
are as a response to the change in overall value of tax relief (which might
still be in tax terms more beneficial than other forms of saving), the
complexity of the arrangements that individuals would face, a specific
feature of the reforms (such as having a higher immediate personal tax
bill) or another factor. Depending on the key driver of behavioural change,
alternative systems (and changes to the current system) could lead to
different behavioural outcomes for senior staff.
82. The relative value of pension contributions to employers and employees
is likely to be an important determinant of behaviour. In the current
system, there is a clear financial benefit to both the employer and
employee of an employer making an employer pension contribution, in
part due to the tax relief and tax-free lump sum, and in part due to the
NIC relief on pension contributions. If there was no longer a clear financial
benefit, employers and employees might prefer other methods of
remuneration after meeting the statutory minimum requirements of
automatic enrolment.
Government contribution to saving
83. Even if individuals have only limited responses to incentives, tax relief can
still be seen within the automatic enrolment framework as a Government
contribution to pension saving. Moving to a single rate of tax relief
presented as a matched contribution would, depending on the rate used,
change the distribution of the Government contribution to pension saving
compared to the current system.
84. Redistributing the Government contribution to automatic enrolment
pension saving would lead to increased contributions and therefore larger
pension funds for basic rate taxpayers, and lower contributions and
therefore smaller pension funds for higher rate and additional rate
taxpayers.
85. Even if a single rate did not increase individual contribution levels, this
redistribution would still lead to higher pension funds at lower income
levels. If higher matching contributions do encourage higher levels of
participation in workplace pension saving, there may also be a reduction
in opting-out.
86. It is also possible that individuals saving more than the minimum might
reduce their own individual pension contribution in response to the
increased contribution from the Government, as they would still be able
to achieve the same combined contribution. However, even in this case
these individuals would have higher disposable income.
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Implementation issues
87. Others with more experience of administering payroll and pension
schemes will have a clearer idea about the implementation challenges of
moving to a more radical system of tax relief that does not use the
marginal rate of taxation. However, that there will be some challenges is
clear.
88. TEE systems (with or without a matched contribution) and single rate
systems would be easier to implement in a relief at source system rather
than a net pay arrangement. In a relief at source system any matched
contribution is likely to have a more visible impact and therefore more
chance of having an impact on savings decisions.
89. Moving to a TEE system would potentially require the running of parallel
systems, with contributions made before the introduction of the new
system remaining within the current tax framework, and new
contributions within the TEE framework. It may be possible to allow
individuals to switch to the new system by paying tax on existing funds,
which would increase tax revenue in the short term at the expense of
collecting less tax in the future. It would also be possible to convert all
existing funds to be part of the TEE system by making a one-off tax charge.
This would raise significant tax revenue, but potentially have much wider
economic and political impacts.
90. TEE and single rate systems would be much harder to implement for DB
than DC schemes. Most DB schemes operate net pay arrangements, and in
many cases (unless the AA is breached) tax relief is not directly linked to
the annual increase in benefits. Some employer contributions are deficit
reduction payments rather than linked to individuals. It is likely that any
system other than marginal relief for DB scheme contributions that tried
to accurately apportion tax relief at the individual level would be complex
and potentially opaque to administer.
91. Alternatively, it may be possible to simplify the way in which relief is
given (for example operating at a scheme level rather than an individual
level) but this more broad brush approach may lead to cross subsidies and
perceived (and / or actual) inequalities in treatment.
92. The consultation specifically asks if different systems should be
considered for DB and DC provision. This would of course be possible,
and DC and DB schemes were treated differently before A-day in 2005.
However, any difference in treatment night raise challenges including:
· The potential for arbitrage between different systems if one is seen to
be more advantageous than the other (as happened, for example, with
different DB and DC systems for contracting-out).
· As the majority of active DB provision is now in the public sector,
perceived inequality between the public and private sector.
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93. There are concerns that the current system, although in theory the same
for DB and DC, treats DB pension provision more generously than DC
provision through the use of generous conversion factors when
calculating the lifetime allowance. At the same time, however, DB
members are currently more likely to be affected by the annual allowance,
and are not able to arrange contributions or remuneration packages as
flexibly as DC scheme members to fit within allowances.
Integration with other parts of the system
94. It is important not to view tax relief in isolation from other parts of the UK
pension saving system, including recent reforms which will also have an
impact on levels of pension saving. These include:
· The introduction of the new State Pension for individuals reaching
state pension age from April 2016 onwards. This is expected to reduce
(though not eliminate) means-testing for retirement income, and will
also lead to the ending of contracting-out for DB schemes. It is likely
that many DB schemes will change as a result of this.
· The introduction of automatic enrolment, which is still only partially
rolled out and with very low contribution levels. So far automatic
enrolment has significantly increased the numbers of people saving for
retirement, but there is little evidence that individuals are putting in
more than the minimum level of contributions. Previous PPI research33
has highlighted the low likelihood that individuals will achieve an
adequate retirement income solely through making minimum
contributions, even over a full working life and when they have
reached the phased in minimum of 8% of band earnings.
· Freedom and choice for DC pension saving. The recent changes
introduced earlier this year are likely to lead to a much greater use of
lump sums as opposed to incomes in retirement, as well as increased
guidance and / or financial advice.
95. While more work needs to be done to examine how all of these policies
interact with one another and how the landscape will look when they have
been fully implemented, it is likely that if individuals wish to provide for
retirement needs solely through pension saving they will need to
contribute more than the minimum level of contributions.
96. There are a number of other potential ways in which greater savings could
be encouraged.
97. The Government could encourage or enable the provision of information
and advice to individuals. Individuals that have access to advice are more
likely to know how much they need to save and when they can expect to
retire.34 Given that individuals are likely to be automatically enrolled in a
DC pension where the final pension outcome will depend on a number of
33 PPI (2014) What level of pension contribution is needed to obtain an adequate retirement income?
34 Unbiased.co.uk (2012)
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factors such as the investment strategy and the charges paid, individuals
could maximise their savings by choosing the type of pension products
more convenient for them. Professional advice may play an important role
in providing individuals information about what pension products are
more adequate for their needs. The recent introduction of the Pension
Wise service in response to Freedom and Choice in DC pensions
recognises the value of good guidance and information in financial
decision making.
98. Automatic enrolment was introduced because the system of incentives to
save and advice has not worked well in the past. Therefore the
Government could also consider a number of other alternative strategies
to maximise individuals’ chances of having an adequate retirement
income:
· Initiatives based on inertia could impact on individuals’ saving
decisions. For example, increasing minimum contribution levels or
implementing initiatives such as “save more tomorrow” and “auto-
escalation,” which commit individuals to increase contribution levels
as their salary increases.35
· Promote initiatives that encourage individuals to use other types of
wealth (e.g. housing equity) to increase their retirement savings.
· Promote initiatives for individuals to work longer. The Government
has already taken some measures in this respect such as the
elimination of the Default Retirement Age (DRA) and the legislated
and planned increases in the State Pension Age (SPA).
99. It is unlikely that any one in isolation would be achieve the required
change in behaviour. Any reform of the tax system that is designed to
influence behaviour should consider how it would operate in the pension
savings environment as a whole.
Potential long term and intergenerational impacts
100. A shift to TEE would bring forward tax collection, but lead to lower tax
receipts from pensions in payment in the future.
101. Demographic projections highlight that the proportion of the
population aged above state pension age is likely to increase significantly
in the future. If the majority of their income is tax free, at a time that age-
related Government expenditure will be under increasing pressure, a TEE
system suggests an increased tax burden on a relatively smaller working
age population. It may be possible to reduce state spending, for example
on state pensions and benefits. However, this may not be easy. An EET
system would be collecting tax on pensions in payment from individuals
who would be benefiting from the age related expenditure at that point in
time.
35 Thaler and Bernartzi (2004)