Pension contributions

dunstonh

Don't agree with your comments about tax free cash at all. If the government wants to stop it, then it will stop.

I never said they couldnt. I just said it was unlikely considering the negative impact it would have on the economy and the way the Govt has been increasing the access to lump sums from the pensions.

Arguments about the effects on the economy are pointless, as you could make the same case about every tax that's ever been brought in.

You havent given any reason for your opinion. Why don't you enlighten us?

Daniel_Elkington

Looking at tax and how it works in a macro sense:

2 schools of thought:

Labour - tax the rich to increase public spending to ensure that money is re-circulated. The risk is that it may be difficult to withdraw public spending later.

Tory - Reduce taxes and public spending so the private sector can spend the money and recirculate. The risk is that the private sector shelter all their funds overseas and don't buy goods in the UK, leading to a net spending decrease.

EIS or VCT should be advised on by a professional IFA (like me or Dunstonh These are the guidelines from the regulator due to the fact they are extremely high risk products, you can buy them yourself but be VERY careful when doing so.

You may want to consider selling the B2L's and buying commercial property and holding them in a company (SPV) which means that you may be able to reduce the income tax you pay on them (by taking dividends rather than income or getting the company to pay into a pension for you - which could be used to buy commercial properties and therefore not pay income tax on taxable rent)

If you can afford to pay in then pay in. You could always buy something more tax efficient with the income later or PCLS.

Additionally you could look at income drawdown to continure to grow the pension and grow more PCLS (pension commencement lum sum) by contributing back into a pension if you dont need the income at retirement or pay into something else.

Quite simply (and I'm not trying to be offensive) the fact that you are asking this question would indicate that you haven't had this conversation with your financial adviser or they aren't particularly good.

You sound like you have tonnes of options and probably need someone to go through them with you so you know what the long-term plan is for you.

It is extremely unlikely they will tax the PCLS. This is something that has been enshrined in the legislation since pensions were set up. I think they would look to remove tax on ISA before they did this.

Gettingeven

dunstonh wrote: »

I never said they couldnt. I just said it was unlikely considering the negative impact it would have on the economy and the way the Govt has been increasing the access to lump sums from the pensions.



You havent given any reason for your opinion. Why don't you enlighten us?

I don't know what you mean? Enlighten you? What about? That the govt can tax anything that moves (or doesn't). Surely you already know that? This govt appears to think that squeezing until the pips squeak will eventually lead to growth. They're called 'cuts'.

Lots of people I know weren't even aware that they can take cash from their pension scheme(yes, really!). Most people believe that they are saving for, guess what, a pension. I remember many years ago when the thought of abolishing MIRAS (mortgage relief at source for the unitiated, when the interest element on mortgage payments was available and it actually made endowment mortgages more attractive) would be the end of the world for people with mortgages. It wasn't.

Thinks change. Even my financial adviser tells me that the wording has now changed on quotes etc for pensions. It used to say 'tax free lump sum', now it says 'pension commencement lump sum'. The words 'tax free' have disappeared. Strange that, don't you think? As with all of these things, it could start as a 5% tax if part of the fund is taken as a lump sum, then eventually rise to 20%. Whatever. Your reason - that it would have a negative impact on the economy, doesn't wash. After all, the govt gains by taxing the lump sum, does it not? Govts like tax.

Daniel_Elkington

well, labour like more tax to increase public spending.

Tories like less tax to increase private sector spending.

dunstonh

Lots of people I know weren't even aware that they can take cash from their pension scheme(yes, really!).

I have never come across someone who didnt know.

I remember many years ago when the thought of abolishing MIRAS (mortgage relief at source for the unitiated, when the interest element on mortgage payments was available and it actually made endowment mortgages more attractive) would be the end of the world for people with mortgages. It wasn't.

That was abolishing a tax relief. It is not creating a brand new tax that would require primary legislation.

Even my financial adviser tells me that the wording has now changed on quotes etc for pensions. It used to say 'tax free lump sum', now it says 'pension commencement lump sum'. The words 'tax free' have disappeared. Strange that, don't you think?

Did your financial adviser also tell you that in 2006 when that change took place that pension lump sums were increased at the same time?

I don't know what you mean? Enlighten you? What about?

I was after some sort of information you had that suggested a tax was likely. As it turns out, you have no such information. Just an opinion. Nothing wrong with an opinion and it is hypothetically possible. However, it just goes against the trend of what has been happening.

doughnutmachine

dunstonh wrote: »

No. Seeing as in 2006 the tax free lump sum payments were increased, it is unlikely they would backtrack now. Plus, the availability of the tax free cash lump sum helps the economy by feeding cash into it. Stopping it would take that away and produce no immediate tax gain with the tax income feeding in over the years. However, the lost cashflow to the economy would be immediate and the tax loss from that would have a greater impact.

i really don't see why the present government would not change present legislation just because it was changed 7 years ago?

would it not be possible for the government to put a tax on the 25% lump sum? that way the government can spend it? i'd imagine a lot of people take the 25% sum and invest it... i think the governement would rather it was spent....

dunstonh

i really don't see why the present government would not change present legislation just because it was changed 7 years ago?

The 2006 changes took nearly 5 years of consultation and great expense. More recently this Govt opened up flexible drawdown to allow greater capital withdrawals. Those are taxed but at a lower rate than would have been if left until death.

i'd imagine a lot of people take the 25% sum and invest it

A great many use it to repay debts. A figure that is expected to increase.