What does the Chancellors pension revolution mean for us?

atush

no, you still can't cash in your pension under age 55.

atush

Quote:
Martin Lewis ‏@MartinSLewis 27m

The more i read on annuity changes the more Im worrying - people will tend to withdraw too much too early #budget2014

I have to say, I was at first thinking WOW, but then I remembered all the posts we get there like post 130 above- and so earlier on this thread I said the same as Martin (not being on Twitter I didn't think to go see what he thinks).

I really am not sure the public at large is responsible enough to not withdraw it all.

I mean, most will be responsible, as they will be forced to take up the 'free' advice. But many will say yeah yeah yeah, just go on and give it to me.

Teaandscones

Pacamack wrote: »

Can anyone tell me if the LTA or any other restrictions on how much you can contribute are still in place? My biggest issue with pensions at the moment is I've no idea if I'm going to have breached the cap in 25 years time.

The chancellor made no mention of the LTA, but the policy costings assume no change in absolute terms to the £1.25m limit with no indexation.
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/293740/PU1638_policy_costings_budget_2014.pdf

This suggests that the proposed changes are good for 50 to 60 year olds with significant DC pension savings, but not so good for those younger than that who have the uncertainty as to the future level of the LTA. On a very simple spreadsheet, if someone has a fund of £100k at age 30, makes contributions of £400 per month indexed up by 2.5% p.a. and makes net returns of 7% p.a. (optimistic but not impossible), then if the LTA is unchanged at £1.25m, there would be a tax bill of approx £800k! if they retired at age 67 and took the excess as a lump sum.

EdGasket

Yay; I'm gonna take the lot out and blow it on fast cars and expensive escorts before I get past it; no point spending it on a care home when I probably won't know what's going on around me anyway!

atush

I think you should rename yourself

FastEddie

Triumph13

Teaandscones wrote: »

The chancellor made no mention of the LTA, but the policy costings assume no change in absolute terms to the £1.25m limit with no indexation.
www.gov.uk/government/uploads/system/uploads/attachment_data/file/293740/PU1638_policy_costings_budget_2014.pdf

That's the closest we've had to 'forward guidance'. Oh well, looks like time to reduce the pension contributions.

bmm78

Putting it into context, the 2015 changes are just proposals at this stage. As part of the process, there is a 3 month consultation period after which the government will set out how they intend to proceed.

It is very early days yet, and these things rarely go through without delays, setbacks, and in a lot of cases watered down legislation.

The cynic might suggest that this is a vote-grabbing exercise. On the surface, there seems to be a lot of hoops to jump through and too many unanswered questions for it to breeze through in April 2015 as planned.

For example, the consultation raises the issue of whether the minimum pension age should be raised so that it is 5 years below state pension age. That would be put a new slant on it for a lot of people.

bmm78

atush wrote: »

I mean, most will be responsible, as they will be forced to take up the 'free' advice. But many will say yeah yeah yeah, just go on and give it to me.

The consultation paper gives the impression that they haven't fully considered the ramifications of what "free guidance" is, how it could work in practice, who then takes responsibility for the guidance/decision, and ultimately the realistic costs of providing personalised expertise to hundreds of thousands of people a year.

It's more like the free guidance bit is a bolt-on to the main changes, and there as an attempt to calm fears that it will create a bigger burden in the long-term (as projections suggest).

It clearly isn't a fully crystallised set of proposals yet.

lvader

bmm78 wrote: »

For example, the consultation raises the issue of whether the minimum pension age should be raised so that it is 5 years below state pension age. That would be put a new slant on it for a lot of people.

That would be a strange move since they have already decided on increasing the minimum pension age to 57 from 2028 (or something like that)

Curious_Moose

hugheskevi wrote: »

The income of old pensioners will be a big issue in the future.

Yikes! I don't want to be reduced to selling magazines in my old age!


On a more serious note, while this is all good news for those of us with DC arrangements, isn't there a danger of Labour simply reversing the changes (as well as the 25% tax free lump sum) if they win the next election?