Of all the tax-raising ideas in Rachel Reeves’ ‘running out of options’ Budget, one stood out for how widely it was shot down: charging employer national insurance on pension contributions.
The row over taxing workplace contributions to our retirement pots stepped up a gear this week, as it emerged that part of such a plan would involve reimbursing public sector pension schemes for the extra cost.
This would leave only private sector employers exposed, their workers’ pensions potentially dented and taxpayers picking up the tab to protect more generous public sector schemes.
Hopefully, this plan – dubbed ‘disastrous’ by retirement campaigner Ros Altmann – has now been shelved but it raises another important question, how do we avoid a race to the bottom on pensions?
Public sector defined benefit pension schemes are far more generous than their private sector equivalents, yet surely the answer isn’t to drag the former down too, but to elevate the quality of the latter.
On this podcast, Georgie Frost, Lee Boyce and Simon Lambert discuss the difference between public and private sector pensions – and how we can try to improve our retirement saving rather than dent it.
Also on this episode, the two sneaky taxes that Lee loathes, is it worth a 39-year-old getting a lifetime Isa before it is too late, and is Goldman Sachs or Santander right with substantially different interest rate predictions – and what does it mean for your mortgage?
And finally, where are Britain’s new property hotspots and why have things dramatically turned around in some areas?
In private sector defined contribution schemes money is paid in by employers and workers and invested to build a pot; in public sector defined contribution schemes contributions are higher but the employer guarantees an income in retirement, in the Teachers Scheme it is 1/57th of career average earnings for every year built up.