Pensions Planning: The NUMBER

SarahB16

michaels said:

I was planning on having 50k pa gross in 24/25 increasing with inflation (ie index linked DB and annuity) to give me a real terms 42.7k.

Problem is, given the income tax threshold freeze, by 31/32 although the gross will have stayed the same in real terms, the net will have fallen to 40.4k in constant prices terms, about 5% less.

Or looked at another way, it would be the same as the basic rate of income tax having been 26% in 24/25 rather than 20%.  What a lie it is (from all parties) that they won't increase income tax.  Imagine the outcry if they had indexed the thresholds but increased the rate payable by nearly 1% pa every year  which is actually completely equivalent.

Although I'm still many years away from retiring (forecast for 2034) I'm very mindful of what you have highlighted too.  My plan is also to not draw from my pension more than the basic rate of tax threshold.  Whilst I'm still contributing to pensions (benefitting from 40% tax relief) I would not wish to contribute much more and instead now also saving in S&S ISAs.  

No point getting 20% tax relief on pension contributions to then pay 40% tax when drawn down.