From https://www.railforums.co.uk/thread...umbers-discussion.238212/page-23#post-6028189
With a factor of 20, even £1,073,100 requires a pension of £53,655 pa in a defined benefit scheme. That requires pay of £80,482.50 pa for someone working 40 years in a 60th accrual DB scheme which is in the top 5% of earners. £80,482.50 should not really be seen as in the bracket of 'quite ordinary salaries' when median pay is £26,000.
A member in a DC scheme obviously gets much less than £53,655 pa for a fund of because of higher conversion factors but even £1,073,100 divided by 40 is £26,827.50 pa.
The penalty for exceeding the lifetime allowance is a tax charge, not sequestration of the excess funds. Given the contributions are paid out of pre-tax income, it isn't a totally unfair provision.
We have to remember that the Treasury sees tax relief on pensions as a 'cost' or 'subsidy' which is disproportionately targeted at higher earners and, by all accounts, would very much like to remove the relief between the basic tax rate and higher tax rate at some point, but is reluctant to do so because of the issues it might create for higher paid professionals in the public sector.
Seems to me that the legislation is doing what it was meant to do which is to allow people to have a reasonable level of income within the tax-advantageous provisions for pension funding but not giving too much away to the better off.
Possibly a problem for people with long service in defined benefit pension schemes but for most people with normal earnings and a defined contribution pension, the expectation that their fund will get remotely close to £1,073,100 is fantasy.
With a factor of 20, even £1,073,100 requires a pension of £53,655 pa in a defined benefit scheme. That requires pay of £80,482.50 pa for someone working 40 years in a 60th accrual DB scheme which is in the top 5% of earners. £80,482.50 should not really be seen as in the bracket of 'quite ordinary salaries' when median pay is £26,000.
A member in a DC scheme obviously gets much less than £53,655 pa for a fund of because of higher conversion factors but even £1,073,100 divided by 40 is £26,827.50 pa.
The penalty for exceeding the lifetime allowance is a tax charge, not sequestration of the excess funds. Given the contributions are paid out of pre-tax income, it isn't a totally unfair provision.
We have to remember that the Treasury sees tax relief on pensions as a 'cost' or 'subsidy' which is disproportionately targeted at higher earners and, by all accounts, would very much like to remove the relief between the basic tax rate and higher tax rate at some point, but is reluctant to do so because of the issues it might create for higher paid professionals in the public sector.
Seems to me that the legislation is doing what it was meant to do which is to allow people to have a reasonable level of income within the tax-advantageous provisions for pension funding but not giving too much away to the better off.
