What does the Chancellors pension revolution mean for us?

Linton

gallygirl wrote: »

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The phrase 'as with any other income' I think is at odds with 'marginal tax rates' - e.g. it suggests 40% tax only on the part above the threshold rather than the whole amount which is what I take 'marginal tax rate' to mean?

The examples given in this document do show money taken from a pension being taxed simply as extra income. I agree that the use of the term "marginal rate" is at best misleading if not completely wrong.

So if you have an income of £30K with a higher rate tax band starting at £40K and take £50K from your pension then you do pay 40% tax on the £40K above the higher rate band - exactly the same as extra wages.

kidmugsy

Linton wrote: »

I agree that the use of the term "marginal rate" is at best misleading if not completely wrong.

It makes me wonder whether they spatched the whole thing together in a bit of a rush. Or perhaps ensured that not many people saw what was proposed. If the document had been widely read in the Treasury, surely someone would have spotted that infelicity: or shall we just blame the schools nowadays?

Francesca7777

Linton wrote: »

Obviously it could seriously affect those foolish people who cash in the lot for the life of riley for a year. But it shouldnt affect anyone who doesnt cash-in their pension. Your ownership of n units of a pension fund gives you the gains from a certain number of underlying shares or bonds. This isnt affected by other people selling their pension fund units and the pension company selling the corresponding number of investments.

One might at first sight think that the whole population selling off all their pensions as soon as the proposals come into effect could have some affect on the stock market. However the % of the population who would be at the right age but not have already bought an annuity or have the knowledge to go for drawdown would be pretty small.

Thanks very much for that clarification! I see what you mean that the % of population that would choose or be in a position to avail themselves of these new rulings could end up being rather small, for the reasons you stated (not to mention those wanting to avoid high taxation on larger sums). But what about all the people who will be turning 55, year after year, AFTER 2015? Won't the depletion go on indefinitely?

paul5046

Are there any countries where you can take the lot so we can see how they have operated.
Ie take the lotand blow it, or be sensible.

kidmugsy

paul5046 wrote: »

Are there any countries where you can take the lot so we can see how they have operated.
Ie take the lotand blow it, or be sensible.

When we lived in Australia years ago, the problem was so common that it had a name: "double dipping". There was legislation intended to put a stop to it. Judging by that link, perhaps the legislation didn't work or was repealed.

Linton

Francesca7777 wrote: »

Thanks very much for that clarification! I see what you mean that the % of population that would choose or be in a position to avail themselves of these new rulings could end up being rather small, for the reasons you stated (not to mention those wanting to avoid high taxation on larger sums). But what about all the people who will be turning 55, year after year, AFTER 2015? Won't the depletion go on indefinitely?

The depletions will but they would have done anyway, just a bit later as people received their pensions and then died. So overall, after an initial bit of excitement one might expect things to be much the same. Also if the proposals have the desired effect of more people making full use of pensions then things could swing the other way.

BobbyWH

I do understand that the Chancellor's changes are in two stages...the big changes coming into effect in April next year. What I am NOt sure about is how much of a pension lump sum I can take from my private pension plans now. I am 58 and have two plans (one valued at £23,000 and the other at£45,000). Am I in a position now to draw the TOTAL of ONE or BOTH in one go.

One person told me that if the TOTAL value of your private plans is more than £30,000 you have to wait until next year to draw the full amounts. Is that right or can I draw one now and draw the other next year?

Proxy

BobbyWH wrote: »

I do understand that the Chancellor's changes are in two stages...the big changes coming into effect in April next year. What I am NOt sure about is how much of a pension lump sum I can take from my private pension plans now. I am 58 and have two plans (one valued at £23,000 and the other at£45,000). Am I in a position now to draw the TOTAL of ONE or BOTH in one go.

One person told me that if the TOTAL value of your private plans is more than £30,000 you have to wait until next year to draw the full amounts. Is that right or can I draw one now and draw the other next year?

You have to be at least 60 anyway for either the triviality or stranded pots rules to apply. So you can't do anything other than the usual drawdown/annuity/tax free cash until next year.

dunstonh

What I am NOt sure about is how much of a pension lump sum I can take from my private pension plans now. I am 58 and have two plans (one valued at £23,000 and the other at£45,000). Am I in a position now to draw the TOTAL of ONE or BOTH in one go.

25%.

Be aware, that it is not currently know if people who commence unsecured pension income prior to April 2015 will be able to move to the new rules after then.

One person told me that if the TOTAL value of your private plans is more than £30,000 you have to wait until next year to draw the full amounts. Is that right or can I draw one now and draw the other next year?

Triviality does not apply to you. So, you would have to wait.

Francesca7777

But presumably, referring to the answer above, if you had ONE plan that was worth less than £10K, you COULD cash that in now? Even if your total of all private plans exceeds £30K?