Thursday, 24 November 2011

The new 50% tax rate: a sure winner!

So now someone's come out and said what a lot of us have been saying all along.  The 50% rate will not make any money, and may in fact cost the government £1bn in tax revenues.

That's not all though, because that £1bn in revenue is lost because wealthy individuals seek to avoid the tax, in part by moving their operations offshore.  This can cause the loss of jobs in the UK, and will have a knock on effect.

I find the details interesting as it shows the true pettiness of the left:
Mr Osborne and David Cameron are in favour of abolishing the top rate but are under intense pressure from the Liberal Democrats not to cut taxes on the wealthy. 
Even though cutting taxes on the wealthy will mean more money in the kitty, so less that the poor have to pay?  Who cares, right?  We're not trying to make the lives of the poor better, but the lives of the rich worse.

Friday, 11 November 2011

This is not the answer

We keep being told that more and more people are suffering in retirement as they don't have enough pensions, so the article linked above came as a bit of a shock.
Potential first-time buyers should be allowed to use their pension savings to buy homes, according to a new report on how the boost the housing market.
Well - that would go some way towards boosting the housing market, but is it really the best answer?  More money available to buy homes will mean house prices rise, so the problem gets even worse.  Surely it'd be better to find some way to bring house prices down, like relaxing planning permissions?
The number of property sales in the UK has crashed since the recession despite 5m people "languishing on waiting lists", the CBI claims today in its Unfreezing the Housing Market study.
I assume that they mean social housing waiting lists, rather than waiting lists to buy a house.  As far as I know (and my brother is in the process of doing it right now) all you have to do is find a house for sale, plonk down the cash and it's yours.  Sure - there are contracts to exchange and the like, but no waiting lists.  So realistically speaking, how many people waiting for a council house are going to be able to buy a house, even if they could access their pension funds?
The CBI said housebuilding, which is at the lowest peacetime level for 90 years, also needed to be increased. It called on the Government to address "structural housing market failures" and allow offices to be turned into homes without planning permission. 
That at least sounds sensible...

Friday, 4 November 2011

Think it through

“We live in perpetual hope that maybe, down the line, we might get a small pay increase,” says Mark, an agency driver currently working for Tesco. “We’re not necessarily looking for pay parity, we’re just looking for the crumbs from the table.”
Fair enough, I suppose.  Everyone wants a pay increase, but the terms and conditions were laid out when you joined - they're not cutting your pay, they're just not paying you as much as you might get if you worked in another role for Tesco.
Mark is one of thousands of agency workers up and down the country who has recently been asked to sign away his rights to the same pay as permanent staff at the supermarket – overriding new equal pay rules which came into effect last month. He stands to lose about £150 extra a week.
No he doesn't.  He had a choice - sign away the "rights" or lose his job.  The £150 a week was never on the table - he never had it, so how can he lose it?  If he was happy to work for his current salary when he got the job, why should he suddenly get a big pay rise now?
On average, temps currently get paid about a third less than permanent staff doing the same job, according to the TUC.
That's usually for a number of reasons.  For example, they've often not been with the company long and are not expected to stay all that long, so they don't get the same level of training as permanent staff, so they don't produce the same quality of work as permanent staff.  Also, they can usually leave with a minimum of notice (1 day is not unheard of) and thus the company can't rely on them to the same extent as they do their own staff.  Also it's often a lot easier to get a temp job (my company has a battery of tests and assessments that you need to pass to get a job, to ensure that they get people who can cope with the role.  For temps who are mostly filing or putting letters in envelopes it's not necessary for them to have the same level of ability, so they don't get the same pay and don't have to do the tests).

I'm sure there are some workers out there who do complicated, detailed work and are employed as temps.  All I can say to them is that if you don't like it, get another job.  If you're vital where you are, threaten to leave.

Fundamentally, I just don't see why companies should be forced to treat temps and permanent staff the same given that there are significant differences between them.

(I also don't think government should be involved at all in what people do in their private interactions and should just stop trying to tell us all how to live, but that's never going to happen)

Civil servants should never be allowed to make agreements

Under the generous arrangement officers working in the Operations and Communications Branch (OCB) are paid for a minimum of six hours overtime when called in on their day off - even if they work fewer hours.

The local branch of the Police Federation, however, noticed that staff were only being paid for the hours in which they worked and took the force to court.
Oh no - they were only being paid for the hours that they worked!  But wait a minute - police officers are on a starting wage of around £30k for 37 hours a week, so that's roughly £17.50 per hour (accounting for holiday), so that's £105 for 6 hours work.  Not bad if you're only called in for 1 hour.  Sounds like a stupid policy.  Sure, allow a little extra for travel if need be, but to have a minimum of 6 hours?  That's definitely stupid.

Never mind the rights and wrongs of it - if the agreement was that they get paid 6 hours for coming in, then fair enough, although you'd hope that the authority wouldn't have to be forced into keeping it's agreements.  Still: a very generous and stupid policy.

This is why civil servants should never be allowed to make agreements (or decisions.  Or anything, really...)

Strike action to go ahead

Good.  I don't think the government should have made the pension offer any better, and now that they're striking they'll have to remove the improved offer.  That's what they said they'd do, anyway.  Of course, these people being politicians, there's no telling whether or not they have the guts to stick with it...

Let's face it, Final Salary pension schemes are expensive.  The government has no money (borrowing about £0.5bn a day)so it needs to cut costs.  The fact that most of the private sector got rid of final salary pension schemes already isn't really anything to do with it (although it's a helpful guide as to best practise).

I reckon if the govt really wanted to stop the strikes, they'd just have to say that anyone who strikes will not have access to any future final salary option, but would move to DC instead, as most of the private sector has.

For those that blame Grand Theft Auto for rising crime

Computer games good, mkay!

Tuesday, 1 November 2011

Things I saw in the news today - part 3

This is a really quick one.  It just really bugs me when people say "oh noes!  The guberment are being ebil and nasty and screwing over pensioners" before we actually know.  I know that the lefties don't like what they're doing, but please can they not at least find something that's confirmed: why not criticise over the lack of a referendum on the EU (oh, sorry, forgot that Labour were part of that too), or the pisspoor sentencing that's happening (hmmm - that wasn't much better under Labour, was it?) or something like that?  Don't just make crap up.

If they announce the end of the triple lock, then pensioners will be no worse off than they were under Labour, will they?  But let's at least wait until they do...

Three things I saw in the news today - part 2

There are suggestions that the government may wish to remove the ability to take a tax free cash sum from your pension pot.  It's not the first time that it's been suggested, and I doubt that it will be the last, but it's still stupid, and would likely be the end of personal pensions.

Pension investments have three main benefits: (i) You sometimes get contributions from your employer (free money!) - and this will be more likely once NEST comes in and it's mandatory for all employers to contribute, but the rates of employer contribution that are mandatory are tiny, and really not significant enough to make much difference.  (ii) You can take 25% of the value of the benefits tax free. (iii) They can serve as a way to defer income, so you can avoid paying tax now, but pay tax on the benefits when you receive them.

If you take away the 25% tax free element, then the only people for whom pensions will be worthwhile are those who are getting free money from their employer (and even they would likely be better off with a higher salary) or those who are currently paying higher rate taxes but who will be on a lower rate in retirement (due to lower incomes).

So if you abolish the tax free cash, the vast majority of people who would still benefit from a pension would be those who are higher rate taxpayers - which doesn't sound like a progressive move in my book.

Also, giving tax relief doesn't cost the treasury anything.  If the school bully normally takes half of your lunch money but one day decides to take only a quarter, it's not cost the bully anything - it just gives you a little more money to get your lunch with.  Leaving the money in the hands of those who earnt it is surely not a bad thing?  I know the tradition these days is to believe that the state knows better than we do, and can spend it so much more efficiently (oops, there goes the sarcasm detector again) but I reckon leaving a little bit of money with those who've worked for it for all their lives is not a bad idea...

One final point: If people have less pensions, guess who has to pick up the slack?  Do we really want people relying more and more on state handouts in retirement?  Surely it's better to offer some incentive to get them saving up for retirement...

Edit to add: I know they're saying that they'll just make it so that you pay higher rate tax on it if you have more than x amount.  This will still impact just about everyone.

Consider a small final salary scheme.  Someone on a pretty average wage (say £25,000) works for them for 20 years.  The pension that they'd accrue on 60ths is £8,333 a year.  Not a lot to live on, right?  Now, suppose the scheme offers the same commutation factors as the governments pension protection fund: 18.66 at age 65 (for post 97 service) - that means that they'd be able to take £40,931.81.

That's about the limit that they're proposing before tax is applied - and that's come from less than half of the average working life.  If they'd been there for 40 years (or had worked elsewhere with similar benefits) then they'd be looking at paying 40% tax on £40k - or to look at it another way, the government would be taking about 16k from the average earner on retirement.  I don't know about you, but I reckon they'll have had enough of my money by then...

Three things I saw in the news today - part 1


"Now: Pensions, set up on a not-for-profit basis, will charge £18 a year for administration plus a 0.3% annual management charge, compared with the 1.25%-1.5% common in Britain."

1.25-1.5% may be common in Britain, but that's often for a managed fund with specific risk expectations.  NEST is going to be the cheap and cheerful provider that this new scheme is meant to be competing with and a quick look at the TPAS website shows that they're looking at charging 1.8% on contributions and then 0.3% annually.  Just looking at the charges, we can see that if you contribute £1,000 a year it will cost the same in both schemes; with less than £1,000 a year you'd be better off in NEST and with more than £1,000 a year you'd be better off with Now:Pensions.  That's completely ignoring investment choices and returns, so the real picture may be rather different and we'll have to wait and see how both of them do.

My issue is that that's not the impression that the article gives - it reads like an advertisement.  Why not say how much the annual charge for NEST will be in the article, rather than using the rate that's apparently common in Britain (without any citation).