sipps

EdInvestor

It has already been suggested, many times, that the tax-free cash perk only benefits people with larger pension pots, i.e. not those whom Labour wish to benefit.

Really? In that case IMHO they are wrong.The tax free cash is available to all at 25% of a fund accumulated with the same basic tax relief rate of 22%.

The additional 18% tax relief paid to higher rate taxpayers is given separately in cash via the HRT's tax return.This is why pension saving is a no brainer for higher rate taxpayers.It is easy to question why higher rate taxpapers should get this additional bunce, which is not even subject to the normal pension restrictions.

I'd have thought that 18% is a much more suitable target for any Government who wants to benefit the less well-off than the tax free cash which is the same for all.

Could this move actually happen?

cheerfulcat

Really? In that case IMHO they are wrong.The tax free cash is available to all at 25% of a fund accumulated with the same basic tax relief rate of 22%.

The argument runs thus - someone with a pension fund of, say, £250,000 could take the tax-free cash and still have enough to buy a worthwhile annuity*, whereas someone with a much smaller fund would do better to buy an annuity with the whole lot. Now, to me that is a fatally flawed argument but I come across it again and again in official and consultative documents ( in my capacity as a private investor only, I hasten to add ), along with the one that says lower paid people are afraid of anything that refers to " tax ", even if the second word is " relief "...


*Yes, I know, not necessarily but a lot of this stuff is the opposite of " joined up ".

dunstonh

The removal of tax free cash is something that does get mentioned periodically and I seem to recall some official document putting it down as a proposal. Whilst this could be hot air, there are some things that the Govt (or more accurately, the inland revenue) don't like about the current rules. Altering the time you can take the tax free lump sum or the not being able to take one at all would resolve some of the issues they have.

margaretclare

cheerfulcat wrote:

The argument runs thus - someone with a pension fund of, say, £250,000 could take the tax-free cash and still have enough to buy a worthwhile annuity*, whereas someone with a much smaller fund would do better to buy an annuity with the whole lot[/B. Now, to me that is a fatally flawed argument but I come across it again and again in official and consultative documents ( in my capacity as a private investor only, I hasten to add ), along with the one that says lower paid people are afraid of anything that refers to " tax ", even if the second word is " relief ":

*Yes, I know, not necessarily but a lot of this stuff is the opposite of " joined up ".

But in the context of the original question - basic information about SIPPs - isn't one of the 'good ideas' about a SIPP the fact that you DON'T have to take an annuity, you can 'leave the fund exposed to the market' and thus it can continue to grow, also you have choice of funds in which to invest it.

Whereas, once you've bought the annuity that's it, you have no further control over it.

Margaret Clare

EdInvestor

.... there are some things that the Govt (or more accurately, the inland revenue) don't like about the current rules.

With the possible exception of the ending of compulsory annuities, A-day (only last month remember) was a GOVERNMENT initiative. Surely we can assume that they've only just now changed the bits of the old rules they didn't like?Why would they change them again?What would be the point?

UNLESS of course people (like Mr Bamford the dimwit) deliberately act against the spirit of the rules in a way that they feel amounts to abuse.

Of course the industry can ALWAYS be relied on to do this.Look at property in SIPPS.THe minute it's mentioned, every wideboy in the land is busily sitting down figuring out ways for rich types to rip off the Revenue.So OF COURSE it gets dropped.

If people don't want pension tax relief dropped, I suggest they don't abuse it.

This fatcat abuse problem is a big reason I also suggest ordinary people should steer clear of pensions, because the whole pension scenario ends up being a game played between the rich, their accountants and the Revenue.

Nobody gives a toss about ordinary people, who end up being caught in the middle with the rules changed not to their advantage - with usually no warning and no way of dealing with the problem, because nobody takes their interests into account.They are all far too busy playing their stupid games. :mad: The recent changes to trivial commutation are a good example.

Pensions are a game for the rich - anyone who isn't in that category should steer well clear IMHO.Fortunately Gordon has set up the system now so we don't need conventional pensions any more, as DH has noted above.:) The only thing that's now needed is to get reasonable treatment of the money that's already in the pension system, and SIPPs/drawdown go a long way towards helping with that.

dunstonh

Surely we can assume that they've only just now changed the bits of the old rules they didn't like?Why would they change them again?What would be the point?

Right from the start, the Govt said there would be another finance act the following year to make amendments to things that were overlooked and close loop holes.

Of course the industry can ALWAYS be relied on to do this.Look at property in SIPPS.THe minute it's mentioned, every wideboy in the land is busily sitting down figuring out ways for rich types to rip off the Revenue.So OF COURSE it gets dropped.

I believe it was the media that got property off the agenda. Not advisers. Whilst many did jump the gun, there were significant numbers who were told to hold tight. I recall the advisers here, myself included, telling people to wait and not jump the gun.

If people don't want pension tax relief dropped, I suggest they don't abuse it.

It doesnt matter if people use it or not. If such a loophole does exist and the revenue are aware that it may be used, then they will look to close it before it does become an issue. You cannot stop people doing things which are allowed within the law.

cheerfulcat

Hello, Margaret Clare

margaretclare wrote:

But in the context of the original question - basic information about SIPPs - isn't one of the 'good ideas' about a SIPP the fact that you DON'T have to take an annuity, you can 'leave the fund exposed to the market' and thus it can continue to grow, also you have choice of funds in which to invest it.

Whereas, once you've bought the annuity that's it, you have no further control over it.

Which is why I said, regarding that particular argument [ re annuity purchase ],

*Yes, I know, not necessarily but a lot of this stuff is the opposite of " joined up ".

Ed - no-one was doing anything except drawing up plans to make use of the planned ability of SIPPs to hold residential property. It is the duty IMHO of tax and investment advisors to use the rules to their clients' advantage, not to that of HMRC. GB just funked it when he saw how popular this was turning out to be amongst the " undeserving " middle classes...ironically he has probably saved those whom he most despises from making a dreadful investment blunder.