Defined BenefitDec 24 2020

Your Shout: Letters to the editor

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This week...

DB market needs rethink

Regarding your article ‘Warning of DB transfer “gold rush” next year’ (Dec 10). 

I have an old defined benefit scheme that I wanted to transfer away for inheritance tax purposes as my life expectancy is not great. 

The quote came to almost 6 per cent of the transfer value thanks to professional indemnity insurance, regulation etc, and even then there was no guarantee that the advice would be to transfer out and into a self-invested personal pension.

The adviser would not accept me as an insistent client – the whole thing needs a proper rethink.

Stuart Forshaw

 

Tax woes

Regarding your article ‘One-off 5 per cent wealth tax could fill £260bn Covid hole’ (Dec 9). 

As a man that has been made redundant close to my planned retirement age, my sole consolation is that I have, through prudence, amassed assets in pensions and Isas that are sufficient to give me a median-income living without endangering the inheritance that my disabled son is likely to require.  

A wealth tax of 5 per cent would hurt both him and me (and introduce a disproportionate sequence of returns risk) and I doubt we are the “wealthy” people that people consider when they imagine this proposal. In a drawdown world this sort of idea no longer targets the filthy rich.

In the real world the people targeted by this will often (and mainly) be those that may struggle to accrue additional income.

Russ Craig

 

Govt response ‘unjustified’

Regarding your article ‘Economy to remain “scarred” by Covid until 2025’ (Nov 25). 

Chancellor Rishi Sunak has warned the “economic emergency” caused by the coronavirus “has only just begun”, with the damage “lasting” with “long-term scarring”. 

Excuse me Mr Chancellor, but did you not realise the consequences of the reckless actions you took in March in throwing the economy off the cliff edge?

The economic emergency was not because of Covid, but because of the government’s reaction to the virus. 

There was another way as many other countries have demonstrably shown, such as Sweden and Japan.

There was no evidence that crashing the economy would save a single life and despite the lack of evidence you decided on a course to destroy many lives and livelihoods and cause misery for millions.  

Back in March we needed serious politicians, with good sense to test the evidence and the courage to lead us through a crisis.  

The article informs us that the government will borrow £394bn this year, the equivalent of 19 per cent of GDP – the highest level in peacetime.  

To do this when your country is not at war is unjustified, unprecedented, and wholly irresponsible.  

This debt will be with us for many generations. The economy is not just about money: the economy is about lives.

Name and address supplied 

 

Tax reforms

Regarding your article ‘Tax reform proposals need to be more joined up’ (Nov 25). 

The chancellor has made the right noises and has the opportunity to do some real good in not only making taxes fairer, but also in the way that he begins to raise the extra taxes necessary to repay the country’s escalating debts. 

It seems likely that capital gains tax will be reorganised. There is a good reason to retain the annual exemption at current levels to encourage share ownership with the associated risk, but I can see the tax being charged as an addition to income, albeit with indexation relief. 

There is no reason to charge a higher rate on buy-to-lets or to restrict the income tax relief on loan interest to basic rate.

The 7.5 per cent dividend surcharge is unfair on genuine share market investors who have done no wrong and are supporting our quoted companies: it should be scrapped. 

The general public does not seem to realise that the NI for an employed person totals over 25 per cent, part paid by the employee and part paid by the employer as part of employment cost. 

Those who are reporting self-employed profits to HM Revenue & Customs pay only 10 per cent or so.

An increase to 20 per cent would be reasonable with some increase in the benefits available to them. 

Employee NI could/should be applied to the dividends of worker/director shareholders, albeit with a top limit of, say, £50,000 actual or deemed remuneration. 

It would be reasonable to limit pension contribution relief to basic rate only with the relief being granted automatically. 

On the other hand, the lifetime allowance is ridiculously low and unrealistic. 

I see no reason to have a limit as long as there is a limit on annual contributions. 

Wouldn’t it be good and simple if Isas and pensions were merged within combined annual contribution limits?

Let’s get rid of the highly complicated residential property nil rate band and instead set the personal nil rate band at £400,000 followed by the current 40 per cent charge or a tired structure from 20 per cent up to 50 per cent. Business property relief and agricultural property relief need to be retained to encourage entrepreneurs.

Income tax: There’s some historic, smallish complications that could go in order to simplify and increase revenue a little, for example, the starting rate. 

The complication surrounding dividend taxation should go. 

Gary Starmer 

Kingston Personal Tax Management