What are good strategies folr avoiding the LTA limit

Neverland

haf63 wrote: »

I agree that the state shouldn't be subsidising the 'wealthy' with tons of tax relief but a £1.25m pot is not really going to deliver much more than around £50k per year and thats at retirement age versus a reduction for any kind of early retirement.
I think the previous 1.5-1.8m was a decent limit and if it comes down again to £1m then it just means people need to have other investements as well as a pension if they want a decent standard of living.
Early retirement at £50k would suit me but not looking likely at the minute

Only about 4m people in the UK make £50k a year or more, because thats all the higher rate income tax payers there are

So that would make you better off that 85% of the UK's working population*

Suggest you take a look at some of the other boards on this forum :money:

(* using Gadgetmind's figures)

grey_gym_sock

gadgetmind wrote: »

I'd start by getting rid of all annual and lifetime allowances and guaranteeing that the PCLS would always be tax free.

abolishing allowances is not trying to be fair most ppl. it's just giving more to higher-rate tax payers.

it's perfectly reasonable that there should be some limits, at least on contributions. the tax reliefs for pensions cost money. they presumably serve the purpose of encouraging ppl to make decent financial preparations for retirement, or not to end up needing to claim benefits. once 1 person has put aside a certain amount, these objectives have been achieved. any further tax concession cost money without achieving anything further.

more certainty, or at least a stated policy, on the future level of the LTA, is a reasonable thing to ask for. so we can at least tell if/when they're going back on what they said.

the current system is already over-favourable to higher-rate tax payers, for ppl who don't have access to a salary sacrifice pension. in that the basic rate is actually (for employees) 20% + 12% NI = 32%, but there is only relief for pension contributions at 20%. whereas on higher rate, it's 40% + 2% NI = 42%, and relief on pensions is available at 40%.

gadgetmind

Neverland wrote: »

I agree with you actually, one of the options I would prefer is eliminating all tax relief for pension and taking the saving off higher rate income taxes

So you'd lower the top rates of income tax? What to?

Neverland

gadgetmind wrote: »

So you'd lower the top rates of income tax? What to?

Well I'm actually a bit of a fan of low flat rate income taxes

This would obviously be horrendously expensive so it would have to be paid for with wealth taxes since you ask

Obviously it does involve double taxation, but we have already accepted that principle in having VAT/NI/income taxes on salaries etc.

I'm afraid I don't have the maths to hand

(Totally off-topic but I would also move the benefits system back to its original contributions based roots which would have much wider support than the current mess)

grey_gym_sock

haf63 wrote: »

I agree that the state shouldn't be subsidising the 'wealthy' with tons of tax relief but a £1.25m pot is not really going to deliver much more than around £50k per year and thats at retirement age versus a reduction for any kind of early retirement.

£50k is 4% ... you could reasonably take 4% using drawdown at age 55, with a fair chance being able to increase that in line with inflation and not running out of money ... that's ignoring tax-free cash, but then you could invest that outside the pension to generate a similar income ... so basically, £50k retirement income on a £1.25m pot is perfectly realistic.

it's also a pretty good income for retirement. when most ppl find they're happy to spend less. and considering that anybody with that size pot is likely to have already paid for their house by the time they retire.

i've no problem with ppl investing to achieve a higher income than that. but do they need tax relief to help them with that? not really.

of course, if that £1.25m pot was your entire plan for retirement income, and you were all set to retire at 55, the government might then increase the minimum age before you can draw the pension to 60. i do have sympathy with ppl concerned about that kind of sudden policy change. and that kind of concern is going to limit how much i'll put in pensions.

fizio

Neverland wrote: »

Only about 4m people in the UK make £50k a year or more, because thats all the higher rate income tax payers there are

So that would make you better off that 85% of the UK's working population*

Suggest you take a look at some of the other boards on this forum :money:

(* using Gadgetmind's figures)

I do realise that I'm in a much better position than many others but also feel 'hard done by' in that I had a good pension plan inc early retirement and my company closed the DB scheme. This then meant that I have had to pile in lots of AVC's to get me back to where I thought I was in the first place. Now the LtA limit has come down to 1.2m which means I can't keep going with AVC's. So I am now looking at a third strategy of external investments and hence foregoing an tax relief benefits. All in all I am getting worse off every year and will have to modify my long term retirement plans - hence the starting of this thread.

Neverland

haf63 wrote: »

I do realise that I'm in a much better position than many others but also feel 'hard done by' in that I had a good pension plan inc early retirement and my company closed the DB scheme. This then meant that I have had to pile in lots of AVC's to get me back to where I thought I was in the first place. Now the LtA limit has come down to 1.2m which means I can't keep going with AVC's. So I am now looking at a third strategy of external investments and hence foregoing an tax relief benefits. All in all I am getting worse off every year and will have to modify my long term retirement plans - hence the starting of this thread.

To buy an index linked annuity to retire on an intial £50k a year at 55-60 requires a fund of about £1.8m, the old lifetime allowance

If you total up how much you've actually contributed into your pension scheme personally, I think you might redefine your definition of "hard done by"

Your company never intended to fund 30 years of retirement for you...when they realised the mistake in their calculations they closed the scheme