What does the Chancellors pension revolution mean for us?

atush

bmm78 wrote: »

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.

I thought, at first at least, it was because they realized that removing commission and going for paid for advice was already impacting the lower end of the wrapped investment market- where the costs were too high for smaller isas and pensions.

BeatTheSystem

If someone draws down from a pension pot, pays tax at marginal rate and then immediately invests in VCT's at a level to cancel tax paid it should be possible to remove all of the fund without paying any tax, of course there is a risk with VCT's. After 5 years the VCT's can be sold. The income from VCT's is typically much higher than annuities which can be enjoyed during the 5 year wait.

atush

Curious_Moose wrote: »

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?

Well labour COULD do this if elected (and they didn't want to be re elected).

Pacamack

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.

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.

Ok, so someone who's 40 with a £200k pension pot making contributions of £2k per month should take some advice then?!!

zagfles

atush wrote: »

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.

It doesn't sound like people will be "forced" to take advice, just that it'll be available free if they want it. But the question is who's going to pay for this "free" advice?

If it's the product provider then that's just wrapping up advice cost in product cost which the RDR was supposed to get rid of!

flearida

hello all ,new poster here,im 56 and have a pension pot of just under 38,000 pounds,i recently underwent heart surgery,and although it did not sort my stroke and breathing problems out,would this effect me in any way,i would like to withdraw a small amount from my pot.thanks in advance

atush

you can have 25% today if you want, but if you are likelyu to die in 6, 12 months etc it would be different

sandsy

Wow! I'm still trying to absorb all of this.
Completely out of left field.
Strikes me that a lot of retirement planning becomes driven by tax - whether that's at the boundary of the personal allowance and BRT, or the boundary of BRT and HRT.


Also, for the latter with larger pots and presumably getting HRT relief on contributions, I'm seeing an opportunity to get money out at the lower rate as currently, but in larger amounts, and reinvest in an ISA to effectively provide a taxfree income in later life?

atush

zagfles wrote: »

It doesn't sound like people will be "forced" to take advice, just that it'll be available free if they want it. But the question is who's going to pay for this "free" advice?

If it's the product provider then that's just wrapping up advice cost in product cost which the RDR was supposed to get rid of!

I was thinking (but have no reason to except suspicion) that we would be 'forced to take free advice' or perhaps have to sign a waiver-something like checking out of a hospital against advice means you can't sue/get benefits etc?

DiggerUK

I said all that needed to be said on this MSE thread.

The upshot of this budget is that the scam known as private pensions is coming to an end, and not before time. The ability to draw down all your pot if you want to is fantastic news.
It means that alternative ways of saving for retirement will now have be looked at.

For me however, the greatest joy is knowing that the usual suspects scams are ending. Yaaaaaaaayy
..._