Correct the STBM pension comparison docs page (#672)

changelog.d/672-stbm-pension-comparison-corrections.changed.md

@@ -0,0 +1 @@
+Corrected the STBM pension comparison page (`docs/book/programs/gov/hmrc/pensions-comparison-stbm.md`): STBM raises the basic-rate limit and every limit above it for non-savings income, and every savings and dividend limit, rather than widening every band, its basic amount is £10,000 in its 2023-24 to 2026-27 systems, Microcosm UK imputes employer contributions from the same ONS ASHE table (P10) as STBM, PolicyEngine UK now estimates carry-forward of unused annual allowance from 2020-21, the threshold income test has been £200,000 since 2020-21, and salary sacrifice under arrangements made before 9 July 2015 can be supplied.

docs/book/programs/gov/hmrc/pensions-comparison-stbm.md

@@ -20,23 +20,36 @@ more detail on the PolicyEngine side.
 
 | | PolicyEngine UK | STBM |
 |---|---|---|
-| How relief is given | Reduces taxable income by the contribution (`pension_contributions_relief`) | Treats contributions as paid net of basic rate: grosses them up by 1/(1 − basic rate) and widens every rate band above the starting band by the gross amount, as under relief at source |
+| How relief is given | Reduces taxable income by the contribution (`pension_contributions_relief`) | Treats contributions as paid net of basic rate: grosses them up by 1/(1 − basic rate) and raises the basic-rate limit and every rate limit above it by the gross amount, as under relief at source. For savings and dividend income it raises every limit, including the starting-rate limit for savings and the top of the 0% dividend band (the dividend allowance), neither of which relief at source raises |
 | Contributions that get relief | The person's own contributions | Employee contributions, additional voluntary contributions **and employer contributions** |
 | Basic-rate relief added to the pot | Not shown separately | Recorded separately (`pension_relief_at_source`) |
-| Earnings limit | Relief capped at relevant UK earnings: employment income, employer-paid Statutory Sick Pay and Statutory Maternity Pay, and self-employment profit | No earnings cap; £3,600 limit when total income is below it |
+| Earnings limit | Relief capped at relevant UK earnings (employment income, employer-paid Statutory Sick Pay and Statutory Maternity Pay, and self-employment profit), or £3,600 for relief-at-source contributions if earnings are lower | No earnings cap; when total income is below a basic-amount parameter the limit is that amount (£10,000 in its 2023-24 to 2026-27 systems, £3,600 before) |
 | Annual allowance | £60,000 (`pension_annual_allowance`), tapered only when adjusted income is above £260,000 and threshold income is above £200,000, as in FA 2004 s. 228ZA | Tapered on total income above a threshold-income parameter |
 | Contributions above the allowance | Annual allowance charge on the excess, taxed as the top slice of income (`personal_pension_contributions_tax`) | Relief stops at the allowance; no separate charge |
-| Employer contributions in the data | Read from the data (`employer_pension_contributions`) | Imputed when missing from the FRS, using the ONS ASHE employer-contribution bands (`src/Pensions.jl`) |
-| Carry-forward of unused allowance | Input `unused_pension_annual_allowance` (FA 2004 s. 228A) adds to the allowance; defaults to nil, as the survey data has no past pension input amounts | Not modelled |
+| Employer contributions in the data | An input (`employer_pension_contributions`). Microcosm UK draws it from the ONS ASHE employer-contribution bands (Table P10); the Enhanced FRS sets it to three times employee contributions for survey respondents and imputes it with a quantile regression forest on the high-income records whose incomes it imputes from the SPI | Imputed when missing from the FRS, using the ONS ASHE employer-contribution bands (`src/Pensions.jl`) |
+| Carry-forward of unused allowance | `unused_pension_annual_allowance` (FA 2004 s. 228A) adds to the allowance. As the survey data has no past pension input amounts, from 2020-21 the default estimates it from an assumed five-year history (this year's input and taper incomes deflated by average earnings growth); before 2020-21 it is nil | Not modelled |
+
+The STBM column describes its Scottish systems, its default. In its
+rest-of-UK systems from 2023-24, `non_savings_basic_rate` points at the 40%
+rate (`params/sys_2023_24_ruk.jl` onwards), so there the gross-up uses 40%
+and, for non-savings income, only the higher rate limit (£125,140, where the
+additional rate starts) rises, not the basic-rate limit. In every system all
+savings and dividend limits rise.
 
 ## Where the two models differ
 
 ### 1. Reducing taxable income versus widening the bands
 
-For an income-tax payer whose contribution stays inside one band, the two
-methods give the same total relief. They can differ when the person pays
-little or no income tax: STBM still records the basic-rate addition to the
-pot, which PolicyEngine UK does not show.
+In STBM's Scottish systems, for an income-tax payer with only non-savings
+income whose contribution stays inside one band above the Scottish starter
+rate, the two methods give the same total relief. They can differ when the
+person pays little or no income tax: STBM still records the basic-rate
+addition to the pot, which PolicyEngine UK does not show. They also differ
+when dividends exceed the dividend allowance, because STBM widens the 0%
+dividend band by the gross contribution and PolicyEngine UK does not.
+Savings income in the starting-rate band does not make them differ: that
+band shrinks as taxable non-savings income rises, so PolicyEngine UK's
+deduction frees as much of it as STBM's higher starting-rate limit.
 
 **The personal allowance taper.** In law, gross pension contributions
 reduce adjusted net income
@@ -61,7 +74,7 @@ employee's bands further than the law does.
 The legal taper
 ([FA 2004 s. 228ZA](https://www.legislation.gov.uk/ukpga/2004/12/section/228ZA))
 uses "adjusted income", which adds employer contributions, and applies only
-when "threshold income" is also above £200,000 (from 2023-24).
+when "threshold income" is also above £200,000 (from 2020-21).
 
 - PolicyEngine UK applies both tests
   (`pension_annual_allowance_adjusted_income` and
@@ -70,8 +83,9 @@ when "threshold income" is also above £200,000 (from 2023-24).
   income of £300,000 but threshold income of £200,000, so keeps the full
   £60,000 allowance. Its limits: by default the pension input amount is
   cash contributions, so defined-benefit accrual is counted only if supplied
-  as an input, and all salary sacrifice is treated as made on or after
-  9 July 2015.
+  as an input, and salary sacrifice is treated as made on or after
+  9 July 2015 unless `pension_contributions_via_salary_sacrifice_pre_2015` is
+  supplied.
 - STBM tapers on total income above a threshold parameter.
 
 Both affect only very high earners.
@@ -80,7 +94,11 @@ PolicyEngine UK does not model the money purchase annual allowance, the
 £10,000 limit on money purchase savings after pensions are first flexibly
 accessed
 ([FA 2004 s. 227ZA](https://www.legislation.gov.uk/ukpga/2004/12/section/227ZA)).
-It always uses the default chargeable amount.
+Its annual allowance charge is always on the default chargeable amount,
+the pension input amount above the annual allowance (s. 227ZA(3)), never the
+alternative chargeable amount (s. 227B), which replaces it when the money
+purchase annual allowance is exceeded and the alternative amount is the
+larger (s. 227ZA(1)).
 
 ### 4. Lifetime and lump sum allowances
 
@@ -92,8 +110,9 @@ are drawn, not to contributions.
 ## What neither model does
 
 - Working out carry-forward of unused annual allowance from the previous
-  three years. PolicyEngine UK accepts the result as an input but does not
-  derive it from past years.
+  three years' actual pension input. PolicyEngine UK accepts it as an input
+  and otherwise estimates it from an assumed history, not from recorded past
+  years.
 - Behavioural responses: contributions are held fixed when tax rates change.
 - Decumulation: crystallisation, the tax-free lump sum, and annuity versus
   drawdown choices.