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Andrew97
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B1542 - Pensions Bill 2019, TSR Conservative and Unionist Party




An Act to abolish the state contribution to occupational pension schemes.

BE IT ENACTED by The Queen's most Excellent Majesty, by and with the advice and consent of the Commons in this present Parliament assembled, in accordance with the provisions of the Parliament Acts 1911 and 1949, and by the authority of the same, as follows:—


1. Definitions
(1) Inflation is defined as that of the Consumer Prices Index as stated by the Bank Of England.

2. Qualification
(1) The person in receipt of the UK state pension must reside permanently and with sole UK citizenship inside the United Kingdom.

3. State Contribution
(1) State contributions to occupational pension schemes will cease from the 1st April 2020.

4. Workplace pension scheme amendments
(1) The minimum contribution into a private pension is hereby increased to 5% of an individual's qualifying earnings.
(2) The minimum contribution for employers is hereby increased to 5% of an individual's qualifying earnings.

5. Abolition of the Triple Lock
(1) The UK state pension shall hereby increase by 2% per annum subject to the following exemption:
(i) Inflation is below 1% in which case only a 1% rise is warranted
(2) Increases to the state pension will occur from the first payment in April based upon a quarterly average of the Consumer Prices Index from the final quarter of the previous year.

6. Extent, short title and commencement
(1) This Act extends to the whole of the United Kingdom.
(2) The provisions of this Act come into force on 1st April 2020.
(3) This Act may be referred to as the Pensions Act 2019.

Notes
Spoiler:
Show


Workplace Pension Scheme Increases
Currently workplace pensions are funded partly by the state while while set at a low rate adds up to a significant sum. It is the decision of this government in line with the Budget passed by parliament in December 2018 that the state will no longer contribute to occupational pension schemes. Instead, the rate at which the employee and employer contribute to an occupational pension scheme will be equalised to make up the shortfall previously taken by government.

Contributions to occupational pension schemes
Income tax relief on occupational schemes cost the tax payer £20.6bn last year. The Conservative Party believes that people should take control of their own pensions and the minimum contribution for the employer and the individual should be increased to 6%. This Bill will be enacted in 2019 so it gives employers and individuals time to prepare for the increased minimum contribution. Currently the government provides only 0.2% of your qualified income and this is tiny, however adds up to a colossal £20.6bn.

Workplace Pension Scheme Increases
Currently workplace pensions are funded partly by the state while while set at a low rate adds up to a significant sum. It is the decision of this government in line with the Budget passed by parliament in December 2018 that the state will no longer contribute to occupational pension schemes. Instead, the rate at which the employee and employer contribute to an occupational pension scheme will be equalised to make up the shortfall previously taken by government.

State contribution to occupational pension schemes will end but to personal, self employed and trusts will continue. Employee contributions to workplace pension schemes are opt out.

Triple Lock
Currently the annual state pension increases depend on the Triple lock which is to say that the state pension increase each year is the largest of either wage growth, the rate of inflation or 2.5%. This represents a significant cost to the taxpayer. This bill abolishes the expensive triple lock on pensions and sets the increase based on on a much more reasonable rate (the Bank Of England's Inflation Target).

Costing
In the 2016-2017 financial year (most recent data) the cost of occupational pension scheme tax relief to the British taxpayer was £22.6bn. Allowing for average wage growth of 3% in the following two financial years and allowing for an average of 20% tax relief that cost increases to ~£22.9bn for the 2019-2020 financial year. Abolition means that the entire cost to the taxpayer is recouped and the savings from this bill should increase cumulatively by around £0.13bn per annum.

https://www.gov.uk/government/upload...ublication.pdf

With regards to the Triple Lock the data from the OBR once again ends at the 2016-2017 financial year however if we take their forecasts through the 2019-2020 financial year as a given then the cost of the state pension at that point is ~£98.9bn with a forecast increase from 2020-2023 of ~£11.3bn. With wage growth forecast to exceed 3% throughout the forecast period and CPI forecast to remain close to target this means that we can reasonably calculate a conservative 1% saving each year from the enactment of Section 5 of this bill.

Taking the OBR forecasts for each financial year and reducing the rate of increase to 2% per annum the estimated savings in each financial year are:

Base: £98.9bn
2020-2021: +£1.9bn (No Saving)
2021-2022: +2bn (£2.3bn Saving)
2022-2023: +2bn (£5.4bn Saving)

https://obr.uk/forecasts-in-depth/ta...state-pension/

Total Savings through the mid-2020’s will therefore be headed towards £30bn.

A vote for this bill is a vote for true fiscal conservatism.

https://www.gov.uk/government/upload...ublication.pdf
https://www.parliament.uk/business/c...blished-16-17/
https://www.ft.com/content/e344e79c-...e-690fdae72044
http://www.telegraph.co.uk/news/2016...k-2020-philip/ http://www.reform.uk/wp-content/uplo...er-system1.pdf http://pensionquestions.co.uk/saving...rement-income/
http://www.ons.gov.uk/ons/interactiv...vc1/index.html
http://www.ukpublicspending.co.uk/
http://www.ageuk.org.uk/Documents/EN....pdf?dtrk=true
http://www.theguardian.com/society/p...ls-social-care

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LiberOfLondon
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I don't see why the state should fund two pension schemes at once - Aye.

Edit - misunderstood this bill so Nay.
Last edited by LiberOfLondon; 2 months ago
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Jammy Duel
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So the minimum amount to be paid into private pensions is being cut by 37.5%...
Dual nationals are being denied state pensions
Pensioners are likely to be faced with real terms cuts in their pensions
The notes and the bill contradict each other
And btw, the state doesn't pay a penny into your private pensions.

And the costing is going to be wrong, a simple 3% wage growth adjustment will be insufficient because the minimum contributions have increased as has the number of people in employment.

(Original post by LiberOfLondon)
I don't see why the state should fund two pension schemes at once - Aye.
It doesn't, unless you work for the state it doesn't pay into your private pension. This £20bn is the tax relief you get on pension contributions, i.e. it means you don't pay tax on money you put into your private pension, you pay the tax when you draw the money back out. What this bill would do (bar the fact that it isn't worded properly and so won't do half of what it aims to do) would tax you when you pay into the pension, and then tax you again when you draw it.
Last edited by Jammy Duel; 2 months ago
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Jammy Duel
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It is worth noting that some of the links are now dead, some are just, I assume, outright the wrong links, and some seem totally irrelevant.
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CatusStarbright
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Can everyone actually afford to pay 5% of their wage into their pension?
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Jammy Duel
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(Original post by CatusStarbright)
Can everyone actually afford to pay 5% of their wage into their pension?
I would wager a very significant portion of the population already do, or not far from, quite possibly the majority
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barnetlad
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This would increase pensioner poverty considerably.
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Rakas21
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(Original post by LiberOfLondon)
I don't see why the state should fund two pension schemes at once - Aye.
As Jammy said it does not. The primary affect of this bill is to amend the workplace pension scheme among other things.
(Original post by CatusStarbright)
Can everyone actually afford to pay 5% of their wage into their pension?
As of April, the standard employee contribution was increased to 5%. This bill is replacing the huge burden to the taxpayer.
(Original post by barnetlad)
This would increase pensioner poverty considerably.
Pensioners are among the wealthiest groups in society and often have access to significant asset values. While we do accept the need for a state pension, we do not believe that pensioners need unsustainable increases each year. A 2% rise is still significant.

..

Will reply to Jammy tomorrow.
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Jammy Duel
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(Original post by Rakas21)
Pensioners are among the wealthiest groups in society and often have access to significant asset values. While we do accept the need for a state pension, we do not believe that pensioners need unsustainable increases each year. A 2% rise is still significant.

..

Will reply to Jammy tomorrow.
Basic state pension is only £6,718.40 p/a...
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Mr T 999
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(Original post by CatusStarbright)
Can everyone actually afford to pay 5% of their wage into their pension?
Right now an employee minimum is 5% and 3% is the minimum a employer currently pays. So it's what the majority are already paying.
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Jammy Duel
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(Original post by Mr T 999)
Right now an employee minimum is 5% and 3% is the minimum a employer currently pays. So it's what the majority are already paying.
Actually there is no employee minimum
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Mr T 999
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(Original post by LiberOfLondon)
I don't see why the state should fund two pension schemes at once - Aye.
Getting tax relief on pensions means some of your money that would have gone to the government as tax goes into your pension instead. So what that mean is you end up paying tax when you pay into your pension as JD has already stated.
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Jammy Duel
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(Original post by Mr T 999)
Getting tax relief on pensions means some of your money that would have gone to the government as tax goes into your pension instead. So what that mean is you end up paying tax when you pay into your pension as JD has already stated.
Or more in your pocket, depends on what sort of pension scheme you use
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Saracen's Fez
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I'm curious to know which 'this government' is being referenced in the notes...
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shadowdweller
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Withholding judgement for now, but leaning towards nay based on the comments thus far.
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Jammy Duel
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(Original post by Saracen's Fez)
I'm curious to know which 'this government' is being referenced in the notes...
recycled bill
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Mr T 999
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Is there a reason why dual nationals are not receiving pensions?
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Jammy Duel
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(Original post by Mr T 999)
Is there a reason why dual nationals are not receiving pensions?
Probably justified by saying they can claim from the other country
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Jammy Duel
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(Original post by Rakas21)
Will reply to Jammy tomorrow.
Beginners guide to knowing you aren't going to get an at all timely response: Rakas says you're going to get one
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Rakas21
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(Original post by Mr T 999)
Is there a reason why dual nationals are not receiving pensions?
(Original post by Jammy Duel)
Probably justified by saying they can claim from the other country
Yes. If somebody has duel nationality then there is no need to burden our own taxpayer.
(Original post by Jammy Duel)
So the minimum amount to be paid into private pensions is being cut by 37.5%...
Dual nationals are being denied state pensions
Pensioners are likely to be faced with real terms cuts in their pensions
The notes and the bill contradict each other
And btw, the state doesn't pay a penny into your private pensions.

And the costing is going to be wrong, a simple 3% wage growth adjustment will be insufficient because the minimum contributions have increased as has the number of people in employment.


It doesn't, unless you work for the state it doesn't pay into your private pension. This £20bn is the tax relief you get on pension contributions, i.e. it means you don't pay tax on money you put into your private pension, you pay the tax when you draw the money back out. What this bill would do (bar the fact that it isn't worded properly and so won't do half of what it aims to do) would tax you when you pay into the pension, and then tax you again when you draw it.
- On your first point the wording will be changed for 4.1, the total minimum will be 10% rather than the current 8% for employee and employer.
- Addressed already but those who choose to have citizenship of a foreign state and likely take their labour abroad should not expect the British taxpayer to grant them all the entitlements that those who work in the UK all their lives would receive themselves.
- This is a speculative argument based on the Mhoc government allowing the BOE to continue failing to meet their inflation targets. We must take a sustainable view of the finances no matter how much we would like to address financial woes.
- Will be amending the notes regarding the later two points.
- Yes, i'm already amending the costing a little.
(Original post by Jammy Duel)
It is worth noting that some of the links are now dead, some are just, I assume, outright the wrong links, and some seem totally irrelevant.
Will be sorted.
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