A lazy generation?

I do understand - I just don't agree.

Many young people see their deductions going to pay for things they don't believe they will get. My own children both pay into occupational pensions, but don't expect to get a state one. Someone who can't afford large payments, or whose employer pays in the minimum will know that their old age is likely to be far less comfortable than that of their parents.

We also paid high interest rates when we were young. We locked into 16% at one point, as we had two babies and thought they could rise even higher. I know what it was like. But house prices were not as high comparative to earnings. I think I am about 15 years younger than you? When we went to apply for a mortgage (full-on interview, with 3 months' payslips in hand) we were allowed to borrow twice one salary and half the other. Nowadays that would equate to about £90k, which would not come close to being enough to buy an average house anywhere in the country. Therefore FTBs have to save for a much bigger deposit or borrow at a much bigger multiple. Even with lower interest rates that is a burden. Also, low rents are a thing of the past, so those who are renting have less to save. In our day it was more common for people to marry younger and not to live together first, so it was easier to save. I blame the sale of council houses for that - the stock of reasonably rented housing sent right down, and landlords could hike the price of rents, which affected both private and social rents.

I may not have statistical evidence of people paying more into pension funds to save on tax - how could I have? - but do you have evidence that it is not happening? I doubt it. People (rightly) don't have to declare their motives for doing what they do, they just do it. We are both speaking anecdotally. You haven't heard of one person who has cut hours to save tax. I have - my neighbour, a hospital doctor who has dropped to half time as her income is only marginally reduced by doing so - in fact the drop in take-home pay is less than the cost of childcare for the days she is now at home. Similarly I know people at the other end of the salary scale cutting hours because of tax credits. I know personally of a friend's daughter who will not increase her hours as keeping them as they are entitles her to top-ups, and she would have to spend on childcare if she earned more. She is a graduate with a lot to offer in the workplace, but the system means that both of these women (at least while their children are young) are better off not working full-time and the tax they would be paying is lost to the economy. The doctor will be able to make up for list time far more easily than my friend's daughter, who has made no career progression or paid pension contributions. She at least has an education to fall back on, but many in her position won't, and are destined to remain low-paid workers who rely on benefits in older age. It does happen, but our personal experiences prove nothing either way.

Also, I am not saying that people get pension credit easily. I do understand the system - just not the figures at which cut-offs and means-tests kick in. I am saying that for those on low incomes it can be galling to see others having a better standard of living because they didn't pay in, just as it can be for low income workers to see people on 'gateway' benefits getting more than they do after a full week's work.

None of this is anyone's 'fault', as I keep saying. The system needs an overhaul. I am not suggesting that pensioners (at any level of pension) get too much - in fact I think the state pension is too low - but I understand young people thinking that they won't get one in their turn. They probably won't, unless we have a radical change in the system.

We now have a low-wage economy, and tax credits have pushed many hard-working people into benefits dependency. This is wrong, IMO. It benefits governments, who can tinker with top-ups and decide who gets them, but it is detrimental to the recipients, who have their agency and choices reduced.

Doodledog you keep talking about what people mightdo at higher incomes but produce scant evidence of it happening. As I have already said most doctors work fewer days, but put in a full weeks work.

There was a specific concatination of events around a change in the law and the rules of the hospital doctors pension fund. But in their case they were ending up with a take home pay cut by £thousands, which is a very different situation - and has now been resolved. I have yet to hear of any one with a taxable income of £100,000 choosing to cut their hours for tax reason. They would usually push on to earn even more to get past that problem.

Similarly with houses, we do not have a glut of unsold houses on the market because no one can afford them, so someone is buying them, and it is currently not buy to let landlords because rents are going up because so many buy to let houses are being taken off the market and sold.

Everyone is skint in their 20s as they start in life and get established. House prices may have been lower before the millenium but interest rates were sky high and it is the size of monthly payments, a combination of interest and capital repayment that decide house prices and we were paying the same proportion of our salary out each month in housing costs as today's young people, just that most of it was going towards the interest. When interest rates went down house prices inceased. At one point half of our monthly income was going out in mortgage payments.

I also think you do not understand how the pension system works. To get a full pension you have to have made the full number of contributions. If you did not work the required number of years you do not get a full pension. Nor does it follow that if you do not get a full pension you automatically get pension credit. To get pension credit all sources of income are taken into account, including occupational pensions, savings and investments and if you are married or living with someone, their income as well. So the majority of people with a state pnsion below the PC rate are not entitled to it.

As an example. My state pension is below the Pension credit level because I have not worked enough years, but my occupational pension, to which I made major contributions, brings me well above the PC limit and anyway, my DH also has a substantial pension and if he dies before me I will get a widow's pension that would keep me above the PC level, if I were below it.

Most people getting PC, which I know from experience, are people who were in poorly paid jobs, had no opportunity to join an occupational pension scheme and were too poor to save separately into a personal pension scheme.

Doodledog

Maybe they do. But other households will have two earners, working hard, perhaps paying 40% tax too, as well as childcare, commuting and other work-related expenses.

I see adults as individuals with individual responsibility. Yes, we form teams in marriage or other circumstances, but that doesn't mean that we can abdicate that responsibility. I think it would be fairer to say that every able adult should pay £X into the collective pot per annum (with exceptions for those genuinely unable to do so). If someone wants to pay for someone else, that could be allowed, but as it is the reverse is true. Two people can get away with paying one lot of tax, plus the lower/non earner can transfer their allowance to the other partner. How is that fair to a two-earner family where both partners contribute?

I have no issue with people making choices, but I do have an issue with people expecting others to fund those choices, and opting out of paying tax is being funded by others - whether it is by not working, working 'cash in hand' or fiddling the books.

We won't agree on this, I know, but that's fine by me - it's just a conversation.

Your logic is good. However, I suspect the non-working outside their home persons feel they are acting quite responsibly.

The high earner is, by earning more - enough for the entire family, paying higher taxes as that person must be earning enough or more than enough to cover the 2 salaries with one.

Nobody, outside that home is being asked to fund sahp choice, imo.

I'd say the SAHperson is contributing, but not the way you prefer. Yes, we'll never agree, it's just an very interesting view on others' thoughts!

Maybe they do. But other households will have two earners, working hard, perhaps paying 40% tax too, as well as childcare, commuting and other work-related expenses.

I see adults as individuals with individual responsibility. Yes, we form teams in marriage or other circumstances, but that doesn't mean that we can abdicate that responsibility. I think it would be fairer to say that every able adult should pay £X into the collective pot per annum (with exceptions for those genuinely unable to do so). If someone wants to pay for someone else, that could be allowed, but as it is the reverse is true. Two people can get away with paying one lot of tax, plus the lower/non earner can transfer their allowance to the other partner. How is that fair to a two-earner family where both partners contribute?

I have no issue with people making choices, but I do have an issue with people expecting others to fund those choices, and opting out of paying tax is being funded by others - whether it is by not working, working 'cash in hand' or fiddling the books.

We won't agree on this, I know, but that's fine by me - it's just a conversation.

Doodledog I am not advocating a cut in pensions or benefits. I am saying that the system is to blame, and that a fairer one would tax everyone (with a means by which one earner in a household could pay the tax of another if one wants to stay at home). We all benefit from living in a society that still has healthcare, a police service, free education to 18, defence, roads etc, so we should all contribute to that.

Apart from merely disagreeing one earner households are justified, I'll give my own explanation - to fall on deaf ears.

If people choose the no childminder route, stay home with their children, raise them to adults unaided by childminders and government payments - - perhaps that notion encompasses a higher earner, with very long hours, who is able to provide, pay taxes, pay into pensions.

Maybe people think the high earner is doing their share by providing for an entire family group, paying taxes at 40-45%.

Doodledog

I can try to explain, but realistically all I am doing is reporting what my friend said . It is not about tax bands, but about UC top ups. The people she's talking about are on low pay, which is topped up if they work above a certain number of hours and earn under a certain amount (I am not sure of the figures). If they work longer hours, the entitlement stops, so their take-home pay is affected when childcare is taken into account. I think that's right, anyway.

Of course that is correct.

Impacted are many mums who stay home/work low hours.

I do not think that the young generation as a whole are lazy- most work hard as did most people in previous generations. Various aspects of life - earnings, costs, expectations, better access to higher education- many things have changed. There are still some people who exploit the benefits system and some who are trapped by it and a small minority who cheat the system.

Dinahmo

Doodledog

The following is taken from the HMRC website:

"Your Personal Allowance goes down by £1 for every £2 that your adjusted net income is above £100,000. This means your allowance is zero if your income is £125,140 or above."

Adjusted net income means after pension contributions paid by the individual and tax on any benefits that person may receive. So it is wrong to say that people lose their personal allowance when they earn £100,000.

Ok, I knew I would get the figures wrong, but the principle remains. I appreciate that it is difficult to feel sorry for someone on that salary, but I am not speaking about sympathy, but about why people might cut their hours. Arguably, at that level of income you have more than covered the basics, and would need even more of an incentive to work than those on a lower income.

Dinahmo

Doodledog Point taken. Thanks for replying.

Our learning disabled young adult son is attending college learning a practical skill alongside getting a support allowance ( because the learning is at a basic level). The college course includes work experience with a local supportive employer. The idea is to get our son able to join the workforce eventually.
A more able friend ( also in early 20s) of his keeps on at us to push our son out to work for money. The friend doesn't understand that at present our son- like many people with learning disabilities, would not be likely to get paid employment without considerable support! The friend thinks our son is lazy to still be at college. Some working young people struggling to pay their own way, or pay for higher level study, do see non earning adults getting benefits or support as scroungers. Many need societies support.

Doodledog Point taken. Thanks for replying.

nanna8

Cash in hand applies to a lot in the building industry. Here they generally have the biggest and best houses and can afford a lot of holidays and their kids go to expensive private school. Part of me thinks, good for them, better than the toffs inheriting vast amounts from their families.

Not so much in the UK. Employers are required to deduct BR tax if the worker doesn't have a CIS certificate. It is a bit more complicated than that but it's been the case for a number of years as a result of so many construction workers working on the black.

biglouis

Another disincentive for people to work harder, longer or seek promotion at present is the freezing of personal allowances. This is taxing by stealth (known as fiscal drag) because many people on different levels are going to be pulled into paying tax or into a higher tax bracket. Ive been on threads where posters who had much needed skills (eg nurse/midwife etc) had returned to work post 50 and been hammered by the tax man. Therefore it makes good economic sense for people being economically raped on PAYE to drop down to part time hours. Or look for cash in hand jobs.

You could always report anyone working cash in hand to HMRC - they have a special line.

Doodledog

The following is taken from the HMRC website:

"Your Personal Allowance goes down by £1 for every £2 that your adjusted net income is above £100,000. This means your allowance is zero if your income is £125,140 or above."

Adjusted net income means after pension contributions paid by the individual and tax on any benefits that person may receive. So it is wrong to say that people lose their personal allowance when they earn £100,000.

Oh, and I also think that if they work extra one week it can impact on their UC for weeks ahead, as they have to make a fresh claim.

I can try to explain, but realistically all I am doing is reporting what my friend said . It is not about tax bands, but about UC top ups. The people she's talking about are on low pay, which is topped up if they work above a certain number of hours and earn under a certain amount (I am not sure of the figures). If they work longer hours, the entitlement stops, so their take-home pay is affected when childcare is taken into account. I think that's right, anyway.

Doodledog

Please would you explain this comment:

"A friend of mine manages an admin office and struggles to get people to work overtime as it would have negative impact on their take home pay - it makes no sense."

It could be that if they work a lot of hours in one month their salary will take them into the next tax bracket for PAYE but over a year, that would even out.

JaneJudge

Monica, would they have had much student finance debt if they are in their 50s? I went to uni in the 00s and tuition fees were only introduced in 1998 and they were much lower than they are now. My one son's fees are £9,250 a year and his maintenance loan doesn't cover his rent so we have to top him up but the loans and costs are astronomical

The debts were lower but so would the starting salaries have been thirty odd years ago.

A big problem is the tax credits, IMO. They were meant to help those on low wages, but they just depressed minimum wage and resulted in the taxpayer subsidising employers- often huge corporations- who keep paying as little as possible. As the hourly rate is so low, and there is a means-tested cut off for receipt of the credits, people have to work a lot of extra hours to see the benefits (and as has been said, if they have children they will have to pay childcare costs too).

I can’t speak for the UK, but in Canada and the US, there’s literally a lack of housing. Things ground to a halt in terms of new houses being built years ago, and never caught up again. I read that in the US alone, it’s estimated there’s a shortage of 4 million houses. And corporations are buying houses in both countries to flip as rentals, with an average of 30% rise in rent per year.

Who can afford that? Certainly not the university or college student, just leaving home. It used to be, in my parents generation, that people could go from high school to work and be able to afford an apartment, then a house. Now? It’s completely out of reach.

Wages have been grossly outstripped by inflation. Those who were reasonably comfortable before are struggling. Those who were struggling are drowning. It’s genuinely bleak for a lot of people.

Like I said, I don’t know if it’s the same in the UK, but in Canada, things are definitely problematic

I have never supported the idea that two wrongs make a right.

Not paying taxes (even if people - wrongly, in my opinion - inherit vast sums) leads to a collapse of the state. Look at what happened to Greece a few years ago for a classic example of a state not collecting taxes.

Cash in hand applies to a lot in the building industry. Here they generally have the biggest and best houses and can afford a lot of holidays and their kids go to expensive private school. Part of me thinks, good for them, better than the toffs inheriting vast amounts from their families.

Do you mean people drawing a pension who also earn money for working, biglouis? Why should they work ‘cash in hand’ when others pay tax on earnings? I pay tax and NI on 100% of my earnings because I have an occupational pension, but whilst it’s dispiriting to see my payslip I can’t argue that it’s unfair, or that I’m being ‘economically raped’.

It’s unfair that there are those who opt out of working and pay no tax (other than purchase tax when they buy things with someone else’s money), and I agree that personal allowances should rise with inflation, but defrauding the taxman is not the same as opting to reduce hours.

I assume you mean not paying income tax on cash in hand jobs.

Another disincentive for people to work harder, longer or seek promotion at present is the freezing of personal allowances. This is taxing by stealth (known as fiscal drag) because many people on different levels are going to be pulled into paying tax or into a higher tax bracket. Ive been on threads where posters who had much needed skills (eg nurse/midwife etc) had returned to work post 50 and been hammered by the tax man. Therefore it makes good economic sense for people being economically raped on PAYE to drop down to part time hours. Or look for cash in hand jobs.