The Chancellor

EdInvestor

Fulham_Mark wrote: »

From next week your tax relief on private pensions drops by 10% - because of the 2p tax "cut" in the budget.

Effectively this is a 2.4% tax rise as you now need to pay and extra £2.40 to get the same contribution as you did this week. The £2.40 you've lost has been taken by Golden Brown.

Amazing how many people don't seem to understand the basics about how pensions work.:rolleyes:

You get tax relief upfront when you pay money into a pension.

But you are taxed on the income you take out from the pension after you retire.

So if the tax rate falls, it has zero effect.You get x per cent less tax relief going in, and pay the same x percent less tax when the money comes out.

dunstonh

Amazing how many people don't seem to understand the basics about how pensions work.:rolleyes:

You get tax relief upfront when you pay money into a pension.

But you are taxed on the income you take out from the pension after you retire.

Technically, its taxable income but you may not be taxed on the whole amount. Plus you can take 25% out and that isnt taxed (at this time).

So, you get tax relief on 100% of your contribution now. You can take 25% out tax free at the other end leaving 75% to buy an income which can be taxable subject to personal allowances.

The reduction in basic rate tax from 22% to 20% isnt next tax year. If you are a basic rate taxpayer and intend to make single contributions into your pension, it is better to do it before the tax rate drops from 22% to 20%. It makes no difference to higher rate taxpayers.

Bean_Counter

EdInvestor wrote: »

Amazing how many people don't seem to understand the basics about how pensions work.:rolleyes:

You get tax relief upfront when you pay money into a pension.

But you are taxed on the income you take out from the pension after you retire.

So if the tax rate falls, it has zero effect.You get x per cent less tax relief going in, and pay the same x percent less tax when the money comes out.

Many of us under how finances work. All you can do is make the best decisions mased on facts at the moment not assumptions on what might happen in the future.

Pensions are still the best tax efficient way to save for the future; and they are worse off than they were. Fact!

EdInvestor

Pensions are still the best tax efficient way to save for the future

For many people, particularly the less well off, I'm afraid this is very questionable.

Bean_Counter

EdInvestor wrote: »

For many people, particularly the less well off, I'm afraid this is very questionable.

No it's not. What is more tax efficient?

dealornodeal_3

Bean_Counter wrote: »

Many of us under how finances work. All you can do is make the best decisions mased on facts at the moment not assumptions on what might happen in the future.

Pensions are still the best tax efficient way to save for the future; and they are worse off than they were. Fact!

Afraid I dont completely agree with you! One doesnt put All their eggs in one basket. 65% in pension fund, and 35% in to Stocks & Shares ISA!

EdInvestor

I think it depends on which end you are looking at things from.

A surprisingly large number of pensionsers don't seem to have realised when they were younger that they would have to pay tax on their pension income.

If you ask them now, they will say that their PEPS and ISAs are definitely more tax efficient ways to save.

dealornodeal_3

EdInvestor wrote: »

I think it depends on which end you are looking at things from.

A surprisingly large number of pensionsers don't seem to have realised when they were younger that they would have to pay tax on their pension income.

If you ask them now, they will say that their PEPS and ISAs are definitely more tax efficient ways to save.

Totally agree with you! I retired last year and it worked well for me. Remember their is only so much of the lump sum of the pension that you can take out. And if you have 15 years or more and there is a FTSE crash you buy more units for your money? But you can lose out with the pension!

Bean_Counter

I guess that all depends on personal circumstances, how much you have to invest, investment spread, management charges etc etc. We can agree to differ.

If nothing else, speak to an IFA (of which I am NOT.)

dealornodeal_3

IFAs will go along with my previous post. I advised a friend of mine, and he put it it to his IFA - And he agreed with me!