What does the Chancellors pension revolution mean for us?

regprentice

wotsthat wrote: »

Personally I find it quite hard to believe that there are significant numbers of people who, despite having debt problems and/ or gambling addictions, took the time and effort to build worthwhile pension pots first.

Depends what you mean by worthwhile.

Worthwhile as a long term pension fund to provide a reasonable income during a long healthy retirement - probably not...

Worthwhile gutting to get the deposit for a 2 year lease on a car/ go on holiday /buy a stupidly large telly etc etc - probably to some.

annuity rates to many are so stupidly low that they would rather 'spend it while they can' . Given the choice between 40k today or 200 a month til you die there will be a significant number of people who see the 200 a month as not worth the restriction.

atush

lvader wrote: »

Basically from 2015 people with no other income could take out £10500 (personal allowance) from their pension pot each year and pay no tax?

If so great news and time to overload the wives pension pot!

All these people are now upset they haven't made sure the wife/oh had one lol.

Tomorrow Cavendish online and HL might crash under new applications lol

brianh

While this appears great news, you have to ask whether the tax benefit of pension saving is now just a giveaway. I believed the deduction in tax somewhat compensated for the pension restrictions now there appears to be no restriction. Why should anyone over the age of say 45 now put the maximum he can afford (and is allowed) into a personal pension.
This will of course reduce the tax reaching the treasury ...... doesn't add up!

harz99

kidmugsy wrote: »

It's easy. Doing the calculation in inflation-adjusted terms, and ignoring the interest forgone on the pension that you might otherwise have drawn earlier (which is reasonable when the base rate is 0.5%p.a.), after the first ten years from restarting the pension you are in profit. So if, say, you are a 65 year old man with a 63 year-old wife, you could live (say) another 16 years after restarting your SRP, then pop your clogs, then the last six years of SRP were pure profit. And then your wife would "inherit" about 90% of that extra pension for another (say) 8 years. More pure profit. The only problem for many people is finding enough to live off while they defer. They may just have been offered the solution.

P.S. The deferment terms are so absurdly expensive for the taxpayer that under the new-style state pensions the reward will be halved.

That's not what I asked for. A worked up example with figures to justify your assertions and illustrate the break even point would be good.

david78

My reading of this is you can take 25% of your pension as Tax Free Cash (as now) then can take the rest but you are taxed at your marginal rate in the year you make the withdrawls.

So if you have a fund of £400k, you take 25% cash tax free (100k), leaving 75% (300k) which can be withdrawn subject to tax?

And is there less tax to pay on this if you are prudent and withdraw say 30k a year over 10 years compared to 300k in one year? It is not clear to me in the budget announcement what actually is being proposed.

atush

That is what is being proposed. You decide, but you pay tax on it.

So those who take enough to be put into the HRT band will pay more tax on it.

Triumph13

david78 wrote: »

My reading of this is you can take 25% of your pension as Tax Free Cash (as now) then can take the rest but you are taxed at your marginal rate in the year you make the withdrawls.

So if you have a fund of £400k, you take 25% cash tax free (100k), leaving 75% (300k) which can be withdrawn subject to tax?

And is there less tax to pay on this if you are prudent and withdraw say 30k a year over 10 years compared to 300k in one year? It is not clear to me in the budget announcement what actually is being proposed.

You've got it spot on. Danny Alexander said afterwards in an interview that not wanting to pay HRT would act as a discouragement from people taking it all in one go.
You take your TFLS as now and then the rest is available to take as taxed income as and when you want

BobQ

getmore4less wrote: »

What happens now if you have £100k in the bank, blow it all and ask for benifits.

Just add the pension money to the capital for deliberate deprivation of assets.

Might also means pension pots can be raided to pay for care.

So its beginning to look like a great set of measures for unlocking the pensions of those that have one, encouraging those with short term views to withdraw them and give a boost to HMT tax revenue, then make it even easier to force people to use their pensions to avoid claiming benefits, finally resulting in the care home spending the pension pot rather than just the income.

david78

OK so if I want to take large chunks of cash out at retirement (in addition to the 25% tax free lump sum from my pension) I need to increase the funding my stocks and shares ISA, but for a year-on-year income I am better off funding my Pension (since I get full tax relief on the way in, and pay less tax on the way out).

Of course I will try to do both. Difficult balancing act though.

SallyG

I want to be the first to ask DH if I can cash in my pension .......