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MSE News: Autumn Statement: Pensions tax relief limit to drop
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# 1
MSE Helen
Old 05-12-2012, 11:37 AM
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Default MSE News: Autumn Statement: Pensions tax relief limit to drop

Chancellor George Osborne has cut the maximum amount you can save in a pension to get the full tax relief...

Read the full story:



Last edited by MSE Helen; 05-12-2012 at 1:42 PM.
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# 2
gadgetmind
Old 05-12-2012, 2:00 PM
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It was even more complicated than that as it was 20k pa for some people during 2009 with different dates for the cut-off depending on how much you earned.

At least these changes have been pushed out to 2014/15 to give people time to plan. There has been no notice in the past and even back-dated changes!

There is also the restoration of the 120% GAD cap to soften the blow.
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# 3
Old Slaphead
Old 05-12-2012, 2:33 PM
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Quote:
Originally Posted by gadgetmind View Post
There is also the restoration of the 120% GAD cap to soften the blow.
Good news.

Hopefully gilt yield index 'floor' of 2% not reduced to compensate ?
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# 4
gadgetmind
Old 05-12-2012, 2:36 PM
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Details regards the 120% are a bit vague though. When is it happening? Now? 2013? Next review?
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# 5
jamesd
Old 05-12-2012, 3:27 PM
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"Pension provider A J Bell says it has been told by HMRC representatives that the change will require legislation. Draft legislation will be produced before the next Budget, although the actual date of implementation will depend on the outcome of discussions between Government officials and the industry".

While I'd like immediate and including all in-force caps that were calculated based on 100%, that looks to me as though it'll be at least the middle of 2013 before it can happen.

The reduced Lifetime Allowance makes it more important than before to commence taking benefits at 55 even if there's no intention to retire then. That'll get the percentage of the lifetime allowance used as low as possible because there will have been fewer years of growth. Some people who do this will also need to take out life assurance so a non-spouse/dependent beneficiary on their death doesn't suffer from the 55% tax charge that starts once benefits are taken. If the income isn't needed it can be reinvested into a pension or just not taken.
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# 6
zagfles
Old 05-12-2012, 4:13 PM
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I presume the carry-forwards of unused allowance in 2014/15 will be based on the current 50k limit, not the lower 40k limit? Can't find anything specific on this in the budget documents.

Eg say someone contributed 40k pa in 2011/12, 12/13 and 13/14. Will they get 30k available for carry forwards to 14/15, or nothing?

When they lowered the limit to 50k in 2011, they only allowed carry-forwards of unused allowance based on the new limit not the old limit for the previous tax years (but that was a massive drop, so I guess they couldn't allow it based on the the old limits!)
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# 7
gadgetmind
Old 05-12-2012, 4:18 PM
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I'd assume 50k but intend to use all of my carry forwards by then.

Interestingly, even though the limit before 2011 was 20k for many due to Special Annual Allowance, it's still assumed to be 50k for carry forwards.

I can feel some PIP fu coming along for me in 2013/14/15!
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# 8
BeatTheSystem
Old 05-12-2012, 7:35 PM
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Is there any word on if fixed protection can be applied for and when?

I have used all my carry backs and it looks like I only have one more paying in period since my next next PIP starts August 30 2013.

Damn them, damn them to hell.
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# 9
jamesd
Old 05-12-2012, 7:49 PM
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There are two protection plans announced, one for sometime in 2013 and another with consultation that might take it to 2014.

Remember that the percentage of lifetime allowance used is calculated at the time of crysalisation/taking benefits and never again for that pension pot, however much it grows to later. If you're 55 or older you can do that now to get a percentage of the current 1.5 million limit before it drops to 1.25 million. You don't need to take the income, you can use income drawdown and not take income if you like. Assuming it's a personal pension of some sort. Best to take the maximum lump sum if it is a personal pension, you can reinvest that outside the pension, or recycle it within the recycling limits if you prefer.

Just get in before the limit drops and you may not need the protection because the crystalisation may keep you below the lower limit.
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# 10
Clifford_Pope
Old 05-12-2012, 7:55 PM
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Quote:
Originally Posted by zagfles View Post
I presume the carry-forwards of unused allowance in 2014/15 will be based on the current 50k limit, not the lower 40k limit? Can't find anything specific on this in the budget documents.
When the 255,000 limit was cut to 50,000 the carry forward allowance was reduced to 50,000 retrospectively for the previous years when it had been higher.
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# 11
zagfles
Old 05-12-2012, 7:59 PM
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Quote:
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When the 255,000 limit was cut to 50,000 the carry forward allowance was reduced to 50,000 retrospectively for the previous years when it had been higher.
Yes, as I said in my PP. However, the drop then was massive, if they'd allowed carry forwards of the full 250k for 3 years it would have defeated the whole purpose of the new cap - allowing someone to potentially put in 800k+ !!
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# 12
MrBeans
Old 05-12-2012, 8:19 PM
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Quote:
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Remember that the percentage of lifetime allowance used is calculated at the time of crysalisation/taking benefits and never again for that pension pot, however much it grows to later.
Ah, I see. That's most helpful, thank you, James.

So if my company definedbenefit+AVC pension pot was worth 300K when my company pension started to be paid 10 years ago, that pension only uses up 300K of my lifetime pension allowance however much that 300K is worth today?
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# 13
jamesd
Old 05-12-2012, 9:14 PM
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Right, unless there was some change in the rules along the way that I don't know about - I haven't been watching the rules for as long as ten years. If it was the last five years or from now, the answer is yes.

You should have received a statement saying how much of the lifetime allowance was used when you started to get the income, if the current sort of rules applied. That percentage then sticks with you for the rest of your life, with any new crystalisations adding to the percentage used until you hit 100% and penalties start.
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# 14
gadgetmind
Old 05-12-2012, 10:02 PM
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Quote:
Originally Posted by BeatTheSystem View Post
Is there any word on if fixed protection can be applied for and when?
Yes, but a trifle vague. I suggest you (and everyone else!) reads the full statement.

http://cdn.hm-treasury.gov.uk/autumn...2_complete.pdf

The verbal statement (and the press "summaries") are a complete waste of time and you really need to work through the whole thing to know what's really being planned.

It looks like they're are planning to be flexible regards the new lifetime allowance, but GOK what will actually be done.
I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.

Last edited by gadgetmind; 05-12-2012 at 10:03 PM. Reason: typo
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# 15
Aegis
Old 05-12-2012, 10:05 PM
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Ah, I see. That's most helpful, thank you, James.

So if my company definedbenefit+AVC pension pot was worth 300K when my company pension started to be paid 10 years ago, that pension only uses up 300K of my lifetime pension allowance however much that 300K is worth today?
Bear in mind that it's 300k expressed as a percentage of the lifetime allowance available at the point you commenced the benefit. As such, if you commenced the pension when the LTA was 1.8M, you would have used 16.7% of your lifetime allowance, leaving 83.3%. This year, you would therefore have 1.25M remaining allowance rather than 1.2M.

Pre A-Day (6 April 2006) commencements can a little trickier to work out, but the same principle applies: a percentage of your lifetime allowance is used at each lifetime allowance test rather than a cash value.
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# 16
westy22
Old 05-12-2012, 11:03 PM
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Does a military service pension (non-contributory) commenced in 1994 and paying a monthly income until my death play any part when calculating the lifetime allowance?

My SIPP is currently at 50% of the lifetime allowance and therefore I am concerned that my service pension might tip me towards the limit.
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# 17
pinmoney
Old 06-12-2012, 7:56 PM
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Can anyone recommend a good independent pensions advisor? i have not got a clue what you are all talking about and as i am 52 (and female) i think i should start to make an effort!

Any advice welcome!
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# 18
gadgetmind
Old 06-12-2012, 7:58 PM
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Quote:
Originally Posted by pinmoney View Post

Any advice welcome!
Start a new thread (with a good subject!), explain your situation, needs and worries, and I'm sure you'll get good input.

Who you need advice from, and how much of it, varies greatly depending on the above.
I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
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# 19
GhIFA
Old 07-12-2012, 11:03 AM
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Quote:
Originally Posted by zagfles View Post
I presume the carry-forwards of unused allowance in 2014/15 will be based on the current 50k limit, not the lower 40k limit? Can't find anything specific on this in the budget documents.

Eg say someone contributed 40k pa in 2011/12, 12/13 and 13/14. Will they get 30k available for carry forwards to 14/15, or nothing?

When they lowered the limit to 50k in 2011, they only allowed carry-forwards of unused allowance based on the new limit not the old limit for the previous tax years (but that was a massive drop, so I guess they couldn't allow it based on the the old limits!)
A summary I have read this morning from one of the providers would suggest that 50k limit will still be available for carry forward from 11/12, 12/13 and 13/14. Wouldn't take that as confirmation though.
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