Simplification is the key - Centre for Policy Studies

State Second Pension will receive contracted-out rebates on earnings between the
lower earnings limit and the upper accrual point. Employers and employees will pay
National Insurance contributions at 12.8% and 11% respectively on earnings between
the upper accrual point and upper earnings limit (UEL). The UEL is £43,888 for the
2009/10 tax year.
Starting in 2010, band 2 (10% band) and band 3 (20% band) will be merged so that
all earnings between the LET and the UAP will accrue additional pension at a rate
of 10%. From an unspecified future date, the band 1 (40% band) will be replaced by
a weekly flat-rate accrual of £1.50 (£78 p.a.). The 10% accrual component will be
withdrawn around 2030, leaving a wholly flat-rate benefit.
Also in 2010, National Insurance credits will be introduced for those with long-term
disabilities and people with caring responsibilities so that they can build up some
additional pension entitlement.
Stocks & Shares
ISA
Tax relief
Upper Earnings
Limit (UEL)
The Stocks & Shares component of an ISA can be invested in shares listed on any
recognized stock exchange, Bonds & Gilts, Unit Trusts, Investment Unit Trusts and
Life Assurance.
Up to £7,200 can be invested in a Stocks & Shares ISA (2009-10 tax year, £10,200
for the over-50’s) less any amount saved in a Cash ISA. This limit rises to £10,200
for anyone aged 18 and over from April 6th 2010 (again less any amount saved in a
Cash ISA).
The cost of tax relief on registered funded pension schemes can be thought of as
the tax that would have been paid were the schemes not registered. It has several
components:
(i) the front-end relief on employee and self-employed contributions;
(ii) plus contributions by employers on the basis that they are not taxed as a
benefit-in-kind for the employee;
(iii) plus employees’ part of the National Insurance rebate to registered
personal pensions (including stakeholders);
(iv) plus funds’ investment income; and
(v) less tax liabilities on pensions in payment in the year in question.
In addition there is the cost of relief for unfunded schemes, notably the tax relief
on lump sum payments to, for example, civil servants.
Revenue-based Taxes and Benefits: Pensions - Personal and Stakeholder
Pensions, 30 September 2009
The UEL is an amount set by the government each year for the purposes of
calculating National Insurance contributions (NICs) payable by employers and
employees.
In the tax year 2009/10, the UEL is set at £844 a week (£43,888 p.a.). An employee
must pay NICs at rate of 11% of earnings between the Primary Threshold and the
UEL, plus 1% of earnings above the UEL. His or her employer must pay NICs at rate
of 12.8% of the employee's earnings above the primary threshold.
Note that from April 2009 the Upper Accrual Point (UAP) replaces the UEL for the
purpose of calculating (and capping) entitlement to S2P. The UAP has been frozen
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