The advice is sound on the assumption that the taxpayer is likely to move up into the higher rate bracket in the future. That is the time to make pension contributions, not when paying tax at the lower rate.Brendan, Is it not carless advice to tell someone on a salary of 30k not to pay into a pension?
It is one way but I think that income tax should be progressive, that people on higher wages should pay a greater proportion of their income in tax.I suppose you could equalise it by standardising the rate of tax everyone pays?
Oh maybe that is not what you meant!
That is the essence of the problem. We incentivise people to provide pensions for themselves by giving them money to do so. The mechanism we choose is tax relief. There is no reason that it has to be so. The state could allow people to contribute an annual or lifetime limit (I'd have both to encourage consistent saving) into a pension and then the state could top that up with a contribution (notionally equivalent to higher rate tax relief).The only reason that the pension system is "regressive" though - is because the income tax system is "progressive"...the reason the higher tax payers get more relief is because they pay more tax, a lower taxed worker does not have to pay the higher tax (that is to their advantage) so why should they get the higher relief?
Brendan, Is it not carless advice to tell someone on a salary of 30k not to pay into a pension?
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