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Credit deflation and the reflation cycle to come (part 2)


spunko

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Castlevania

With pensions they’re going about it completely the wrong way. Reducing tax relief screws over the young who are already struggling. What you need is a mechanism to extract more tax from comfortably well off pensioners. The answer is to make them pay NIC’s on their incomes. If you earn £40k as a pensioner then you pay all of £5.5k in tax. It’s way too small a percentage.

The other thing that people seem to ignore in all these articles on pension contribution tax relief is that most people contribute to a pension via a work scheme, so they also get relief on NIC’s. So in reality most working people already only pay £0.68 for £1 of gross pension contributions. 

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The US government and the Fed appear to be using a flamethrower rather than a fire extinguisher to put out the fire....just make sure you don't get burnt!

 

 

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14 minutes ago, AWW said:

I can't remember the last time I worked on a project that was delivered because of good management. All the good stuff I've worked on has been delivered by good people who worked out how to get stuff done despite crap management.

Project Managers are my biggest bugbear. Most are box tickers, rarely understand the big picture and place a huge management overhead of their own on the people who actually create stuff.

Project management is like economics.  It's not a science.  You can usefully use scientific method to help, just don't drink the Cool Aid!  Talking of Covid......!

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34 minutes ago, AlfredTheLittle said:

Is it the day in the tax year when you finally start earning for yourself rather than the government? I know that day's been moving forward evermore, and with only 14 days left in the tax year it seems about right

Fortunately that day isn't 23rd March just yet.

Its some sort of budget esq type day where Sunak is setting out where he will look to raise taxes in the future and start consultations.

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25 minutes ago, Harley said:

Project management is like economics.  It's not a science.  You can usefully use scientific method to help, just don't drink the Cool Aid!  Talking of Covid......!

What a lot of PMs forget is that it's people, not spreadsheets, who deliver projects. They're People Managers.

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46 minutes ago, MrXxxx said:

The US government and the Fed appear to be using a flamethrower rather than a fire extinguisher to put out the fire....just make sure you don't get burnt!

 

 

The implication seems to be that buying 10 year US treasury bonds could be a good short-term trade; i.e. there might be a significant short-squeeze coming up.

What's not clear is the time-scale ... but sounds like months (or even weeks), not years.

I'm frightening myself that I'm even thinking of taking a punt on this.

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1 hour ago, Castlevania said:

With pensions they’re going about it completely the wrong way. Reducing tax relief screws over the young who are already struggling. What you need is a mechanism to extract more tax from comfortably well off pensioners. The answer is to make them pay NIC’s on their incomes. If you earn £40k as a pensioner then you pay all of £5.5k in tax. It’s way too small a percentage.

The other thing that people seem to ignore in all these articles on pension contribution tax relief is that most people contribute to a pension via a work scheme, so they also get relief on NIC’s. So in reality most working people already only pay £0.68 for £1 of gross pension contributions. 

I think they will merge tax and NI for the reasons you state.Its why im keeping my pension income to £12.5k and the rest ISAs and keep the rest in for inheritance tax reasons etc.Its incredible that all they do is look for more tax instead of dealing with cutting the state,its out of control.

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AlfredTheLittle
2 hours ago, Castlevania said:

With pensions they’re going about it completely the wrong way. Reducing tax relief screws over the young who are already struggling. What you need is a mechanism to extract more tax from comfortably well off pensioners. The answer is to make them pay NIC’s on their incomes. If you earn £40k as a pensioner then you pay all of £5.5k in tax. It’s way too small a percentage.

The other thing that people seem to ignore in all these articles on pension contribution tax relief is that most people contribute to a pension via a work scheme, so they also get relief on NIC’s. So in reality most working people already only pay £0.68 for £1 of gross pension contributions. 

I would solve the public sector pension problem by introducing a new tax rate of 100% on pension income over ,£100k pa. No reason why anyone should be getting a pension more than 4 times higher than the average wage, particularly a public sector one.

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22 minutes ago, AlfredTheLittle said:

I would solve the public sector pension problem by introducing a new tax rate of 100% on pension income over ,£100k pa. No reason why anyone should be getting a pension more than 4 times higher than the average wage, particularly a public sector one.

image.png.fdcd7cd1b8c861f492cf42d9f80ea01b.png
            

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https://www.drax.com/investors/proposed-acquisition-of-pinnacle-renewable-energy-inc-a-major-international-supplier-of-sustainable-biomass/

I've just received an invitation to vote on this proposed acquisition at an EGM. 

The Board believes that the Acquisition advances Drax’s biomass strategy by more than doubling its biomass production capacity, significantly reducing its cost of biomass production and adding a major biomass supply business underpinned by long-term contracts with high-quality Asian and European counterparties. The Acquisition positions Drax as the world’s leading sustainable biomass generation and supply business

I'm not convinced that transporting wood pellets from Canada is particularly "green" but people seem to like it as the share price is doing well so I'm not complaining.

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Talking Monkey
1 hour ago, AlfredTheLittle said:

I would solve the public sector pension problem by introducing a new tax rate of 100% on pension income over ,£100k pa. No reason why anyone should be getting a pension more than 4 times higher than the average wage, particularly a public sector one.

Kin hell are there public sector workers on 100k pensions

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49 minutes ago, feed said:

image.png.fdcd7cd1b8c861f492cf42d9f80ea01b.png
            

To be fair, not everyone is a full-time worker. It would be interesting to see both the mean and (more importantly) median income of all working-age adults in the UK. It might be that the mean wage over all working-age people is less than the £30k median of all full-time employees.

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5 minutes ago, BurntBread said:

To be fair, not everyone is a full-time worker. It would be interesting to see both the mean and (more importantly) median income of all working-age adults in the UK. It might be that the mean wage over all working-age people is less than the £30k median of all full-time employees.


sure, but suggesting that pensions (or anything else) should be taxed as a factor of part time wage income is a bit much. 
Annualized on mean/median hourly wage would be more appropriate, if you wanted to include part time worked hours.  

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Popuplights
5 hours ago, Hancock said:

Looks as if the DT has been tipped off that pension tax breaks are about to be decimated.

https://www.telegraph.co.uk/money/consumer-affairs/city-braced-bombshell-raid-middle-englands-pensions/

Good comments -

image.png.3f32a1e7fbf6a6d5f15a38841420efeb.png

Have you got another link that is not behind a firewall? This is very relevant to me as I am about to decide whether to take my pension now, or transfer to a SIPP

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1 minute ago, Popuplights said:

Have you got another link that is not behind a firewall? This is very relevant to me as I am about to decide whether to take my pension now, or transfer to a SIPP

Fears of a bombshell tax raid on pensions are spreading in the City with the Treasury understood to be considering radical cuts to tax relief.

Officials have signalled they are debating whether to slash higher-rate tax relief on pensions contributions in private meetings with industry, The Telegraph can reveal.

Whitehall sources have ruled out proposals for a pensions tax hike on March 23, dubbed "Tax Day" in Whitehall.

However it is thought reforms are being seriously considered that would be highly damaging to the finances of Middle England. 

About £40bn a year is spent on pension tax relief – a large proportion of which goes to public sector schemes. Any reform would save enormous sums for the Treasury at a time when the Chancellor Rishi Sunak is under huge pressure to raise cash to pay back the growing pandemic bill.

Experts said the plans would seriously damage millions of workers' retirement prospect and be "politically toxic when people realise what it means for them".

Pension savers would be hundreds of thousands of pounds worse off in retirement as they would suffer a steep reduction in the boost given to all money saved into pensions.

Tax relief is due at your marginal rate of income tax as an incentive to lock money away until your 55th birthday.

 

The Chancellor is said to have been considering limiting tax relief on pensions contributions to a flat rate of 20pc or 25pc for all workers since last November.

Moving to 25pc would put those on middle and higher incomes in the crosshairs for cuts while boosting the amount received by basic-rate taxpayers, all those earning less than £50,000 in the current tax year.

Those with both "defined benefit" pensions, as well as younger workers with "defined contribution" plans, would be hit.

Under a 25pc flat rate, a 35-year-old earning £60,000 paying 4pc of their salary into a pension could be £85,000 out of pocket by retirement age, according to analysis by AJ Bell, the stockbroker. To make up for the lost tax relief, they would have to contribute an extra £50 per month. 

AJ Bell founder Andy Bell said: “Removing higher-rate tax relief would be politically toxic when people realise what it means for them. The impact would be most painful for people in public sector defined benefit schemes and the sad truth is that this would include front line NHS and emergency services workers who have worked so hard to help the country through the Covid-19 pandemic.”

While reform would save the Government billions each year, it would seriously harm the nation's long-term personal finances.

Steven Cameron, of Aegon, another pension firm, said the reform would make a big dent in the future pension pots of higher and additional rate taxpayers unless they increased their contributions.

A higher, flat rate of relief would be in line with the Government’s "levelling up" agenda and could be sold politically as a way to make the system fairer, Mr Cameron suggested. 

Peter Glancy of Scottish Widows, the pension provider, said reform would be “horrendously difficult” to implement. Mr Glancy warned any change could add a layer of complexity to an already overly complicated tax system for pensions.

Former chancellor Gideon is thought to have come close to cutting relief in 2016 but u-turned at the last moment when confronted with a fierce rebellion from the Conservative back benches.

Romi Savova of PensionBee, a pensions firm, said that pensions tax relief would be an obvious tax grab. “This has long been talked about and the likelihood of it happening increases with time. It can’t stay as it is forever and it is easier to do during the crisis, politically speaking,” she said.

The Treasury declined to comment. It has previously said any announcements made on Tuesday would not have immediate fiscal implications. It is expected to publish a series of consultation papers giving various options for reform.

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ThoughtCriminal

Found this interesting. 

 

MK covers a lot of the topics discussed on here regarding inflation and what's to come. 

 

Lots of good stuff on China and how their deflationary effect is over fir good. 

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Popuplights
1 minute ago, Hancock said:

Fears of a bombshell tax raid on pensions are spreading in the City with the Treasury understood to be considering radical cuts to tax relief.

Officials have signalled they are debating whether to slash higher-rate tax relief on pensions contributions in private meetings with industry, The Telegraph can reveal.

Whitehall sources have ruled out proposals for a pensions tax hike on March 23, dubbed "Tax Day" in Whitehall.

However it is thought reforms are being seriously considered that would be highly damaging to the finances of Middle England. 

About £40bn a year is spent on pension tax relief – a large proportion of which goes to public sector schemes. Any reform would save enormous sums for the Treasury at a time when the Chancellor Rishi Sunak is under huge pressure to raise cash to pay back the growing pandemic bill.

Experts said the plans would seriously damage millions of workers' retirement prospect and be "politically toxic when people realise what it means for them".

Pension savers would be hundreds of thousands of pounds worse off in retirement as they would suffer a steep reduction in the boost given to all money saved into pensions.

Tax relief is due at your marginal rate of income tax as an incentive to lock money away until your 55th birthday.

 

The Chancellor is said to have been considering limiting tax relief on pensions contributions to a flat rate of 20pc or 25pc for all workers since last November.

Moving to 25pc would put those on middle and higher incomes in the crosshairs for cuts while boosting the amount received by basic-rate taxpayers, all those earning less than £50,000 in the current tax year.

Those with both "defined benefit" pensions, as well as younger workers with "defined contribution" plans, would be hit.

Under a 25pc flat rate, a 35-year-old earning £60,000 paying 4pc of their salary into a pension could be £85,000 out of pocket by retirement age, according to analysis by AJ Bell, the stockbroker. To make up for the lost tax relief, they would have to contribute an extra £50 per month. 

AJ Bell founder Andy Bell said: “Removing higher-rate tax relief would be politically toxic when people realise what it means for them. The impact would be most painful for people in public sector defined benefit schemes and the sad truth is that this would include front line NHS and emergency services workers who have worked so hard to help the country through the Covid-19 pandemic.”

While reform would save the Government billions each year, it would seriously harm the nation's long-term personal finances.

Steven Cameron, of Aegon, another pension firm, said the reform would make a big dent in the future pension pots of higher and additional rate taxpayers unless they increased their contributions.

A higher, flat rate of relief would be in line with the Government’s "levelling up" agenda and could be sold politically as a way to make the system fairer, Mr Cameron suggested. 

Peter Glancy of Scottish Widows, the pension provider, said reform would be “horrendously difficult” to implement. Mr Glancy warned any change could add a layer of complexity to an already overly complicated tax system for pensions.

Former chancellor Gideon is thought to have come close to cutting relief in 2016 but u-turned at the last moment when confronted with a fierce rebellion from the Conservative back benches.

Romi Savova of PensionBee, a pensions firm, said that pensions tax relief would be an obvious tax grab. “This has long been talked about and the likelihood of it happening increases with time. It can’t stay as it is forever and it is easier to do during the crisis, politically speaking,” she said.

The Treasury declined to comment. It has previously said any announcements made on Tuesday would not have immediate fiscal implications. It is expected to publish a series of consultation papers giving various options for reform.

Well I have finished paying in, as long as they don't fuck about with the 25% tax free lump sum.... 

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AlfredTheLittle

Alternatively they could sort it more simply just by reducing the lifetime allowance, or increasing the tax on amounts over the allowance.

In an ideal world I'd still go for a high tax rate specifically on high public sector pensions as that would also tax all the boomers who have already retired, otherwise they'll have to keep putting up council tax to pay them.

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12 minutes ago, Popuplights said:

Well I have finished paying in, as long as they don't fuck about with the 25% tax free lump sum.... 

Yes but thats the thing, they shout about levelling up, when what they really mean is fucking over the young and workers ... and leaving the asset owning class well alone.

We'll see what they actually come up with, but the DT is usually what they use to leak the message several days in advance.

 

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Popuplights
9 minutes ago, AlfredTheLittle said:

otherwise they'll have to keep putting up council tax to pay them.

Yep. Got my bill today. 

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Popuplights
7 minutes ago, Hancock said:

Yes but thats the thing, they shout about levelling up, when what they really mean is fucking over the young and workers ... and leaving the asset owning class well alone.

We'll see what they actually come up with, but the DT is usually what they use to leak the message several days in advance.

 

Mate, I fully agree. I have been extremely lucky. I have a final salary pension. No Debt or mortgage.

My kids however, university loans, rubbish pension, sky high housing. I hope for their sakes I die young 😂😂😂😂

 

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Clearly all part of a plan the change the way income tax is collected

Freeze thresholds with expected wage inflation, moving more people into the 40% threshold
Remove any offsets / benefits within the 40% threshold
Hold the lower limit so that it becomes less viable to work under that limit as inflation increases 

Suddenly it's easier to move to a 30% tax on everything above the lower limit.  

 

 

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18 minutes ago, Hancock said:

Fears of a bombshell tax raid on pensions are spreading in the City with the Treasury understood to be considering radical cuts to tax relief.

Officials have signalled they are debating whether to slash higher-rate tax relief on pensions contributions in private meetings with industry, The Telegraph can reveal.

Whitehall sources have ruled out proposals for a pensions tax hike on March 23, dubbed "Tax Day" in Whitehall.

However it is thought reforms are being seriously considered that would be highly damaging to the finances of Middle England. 

About £40bn a year is spent on pension tax relief – a large proportion of which goes to public sector schemes. Any reform would save enormous sums for the Treasury at a time when the Chancellor Rishi Sunak is under huge pressure to raise cash to pay back the growing pandemic bill.

Experts said the plans would seriously damage millions of workers' retirement prospect and be "politically toxic when people realise what it means for them".

Pension savers would be hundreds of thousands of pounds worse off in retirement as they would suffer a steep reduction in the boost given to all money saved into pensions.

Tax relief is due at your marginal rate of income tax as an incentive to lock money away until your 55th birthday.

 

The Chancellor is said to have been considering limiting tax relief on pensions contributions to a flat rate of 20pc or 25pc for all workers since last November.

Moving to 25pc would put those on middle and higher incomes in the crosshairs for cuts while boosting the amount received by basic-rate taxpayers, all those earning less than £50,000 in the current tax year.

Those with both "defined benefit" pensions, as well as younger workers with "defined contribution" plans, would be hit.

Under a 25pc flat rate, a 35-year-old earning £60,000 paying 4pc of their salary into a pension could be £85,000 out of pocket by retirement age, according to analysis by AJ Bell, the stockbroker. To make up for the lost tax relief, they would have to contribute an extra £50 per month. 

AJ Bell founder Andy Bell said: “Removing higher-rate tax relief would be politically toxic when people realise what it means for them. The impact would be most painful for people in public sector defined benefit schemes and the sad truth is that this would include front line NHS and emergency services workers who have worked so hard to help the country through the Covid-19 pandemic.”

While reform would save the Government billions each year, it would seriously harm the nation's long-term personal finances.

Steven Cameron, of Aegon, another pension firm, said the reform would make a big dent in the future pension pots of higher and additional rate taxpayers unless they increased their contributions.

A higher, flat rate of relief would be in line with the Government’s "levelling up" agenda and could be sold politically as a way to make the system fairer, Mr Cameron suggested. 

Peter Glancy of Scottish Widows, the pension provider, said reform would be “horrendously difficult” to implement. Mr Glancy warned any change could add a layer of complexity to an already overly complicated tax system for pensions.

Former chancellor Gideon is thought to have come close to cutting relief in 2016 but u-turned at the last moment when confronted with a fierce rebellion from the Conservative back benches.

Romi Savova of PensionBee, a pensions firm, said that pensions tax relief would be an obvious tax grab. “This has long been talked about and the likelihood of it happening increases with time. It can’t stay as it is forever and it is easier to do during the crisis, politically speaking,” she said.

The Treasury declined to comment. It has previously said any announcements made on Tuesday would not have immediate fiscal implications. It is expected to publish a series of consultation papers giving various options for reform.

I don't see how this will be most painful for the public sector defined benefit schemes. It's obviously the defined contribution schemes where you lose out.

If they cut the tax relief, then the scheme actuaries for all the funded DB schemes will say that the employers and employees contributions need to go up. The government is paying the employers contribution, and the government will have to go through all the shit of getting the employees contribution rates increased.

For the unfunded schemes like the NHS I don't understand how it has any effect at all. There's no direct link between the contributions and the promised benefits.

 

 

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35 minutes ago, Popuplights said:

My kids however, university loans, rubbish pension, sky high housing. I hope for their sakes I die young 😂😂😂

Well if they start trying to push you to get a covid vaccine you know they're thinking the same!

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