What you say has always been the case to some extent given the whole point behind giving tax relief at the highest rate was on the principle of deferred taxation ie by being responsible and not spending today but saving for when you retire the government would let you keep all the investment return and then pay back the deferred tax in the form of income tax.

Which is why when I hear the arguments about its unfair how some people get 40% whilst others only 20% I get annoyed - they get as a loan in effect to persude them not to spend it all today to avoid the state having to keep them tommorrow. Obviously some people by becoming basic rate tax payers can pull a fast one.

The problem we have is over the years governments have got into the habit of tinkering and tweaking with everything constantly. We are now at the point at which you can't really trust that in 30yrs time having locked away your saving that the rules will be the same. Trouble is no one in HMG seems to see that as a problem.

A the end of the day if the carrot is not tasty enough no one will bother. The obvious risk is that having forced a migration to other more flexible forms of saving the money is all spent (or given away) before you retire.

In theory given the technology available there is no reason why the exact amount of deferred tax couldn't be recorded annually and accurately so you pay back what is actually due to HMRC irrespective of the tax rate at the time you pay in or take out.

Stanley has a point about the retired having to continue to make NH contributions, and that must then mean as this is a form of insurance, ongoing, the treatments and drigs are being paid for and must be available, no excuses.

If that is to be the case the taxpaying threshold for the retired must be raised and IHT reduced, ideally abolished, because the money/assets has/have already been taxed, except possibly in the case of pension pots. Mind you, given the actions of Zanuliebore, and those just retired/retiring with pension pots having been penally taxed so tyhose pots should be totally exempt and those passing the legislation should have their pensions dramatically reduced, halved, just as they did for those they were supposed to be looking after.

That is after proceedings for incompetence and damages awarded to those that suffered against Bliar/Brown et al (Bliar because of his pact not to interfere with Browns tax raising and expenditure- a dereliction/adication of his obligations to be the leader and curb and control the excesses of Brown/Balls excesses)and also the opposition for failure to discharge their obligations.

That also means that the public service pensions must also be halved, for the higher paid, say above £50k.

Money for this could easily be raised for these by opting out of the EU payments/freeing up bureaucracy/requirements/taxes imposed by/as a result of the EU of which landfill is just a start. Bye bye the obligation to support the bail outs of the feckless countries in the Euro, including to the French farmers/Spanish fishing fleet.

Ian, good point, fools rush in?

I think this discussion has gone off topic a little. The issue is not about fair tax rates for pensioners if income tax and NI are merged. It's about the fact that if you invest in a pension you want the tax rate on withdrawal to be no higher than when you put contributions in otherwise you might be better off not saving this way.

From my own experience I can recall putting contributions in when the top tax rate was 60% in the 1980's, I am now a basic rate pensioner. For me it worked well.

Anonymous 1 needed this 'Off the Record'

As usual the contributors to Citywire are following the Daily Mail level of discussion, this is not about NI as a stealth tax! It's about whether pensions are potentially no longer worth the risk of contributing if the basic rate of tax has to increase.