MSE News: Budget 2014: Radical reforms to give greater access to pensions savings

Zelazny

stray_dog wrote: »

Could someone please try to answer this about the new pension rules. I currently have a pension pot with Scottish Widows worth around £165000. When I reach 55 would it then be possible to take 25% tax free and then continue to pay into it?

Unless things have changed a lot, you would not be able to do this (and nor would you want to).

There's no reason you can't simply open a new pension to pay into, and no reason you can't then subsequently take the 25% from that one as well.

besti

It will never make it to law. It will be the same as when they said you could put resi property into SIPP's. At the last minute they will say that you cannot be trusted with your money and scrap the idea.

Proxy

besti wrote: »

It will never make it to law. It will be the same as when they said you could put resi property into SIPP's. At the last minute they will say that you cannot be trusted with your money and scrap the idea.

Unlikely. It's the biggest announcement in this budget and has proven quite popular with many.

A u-turn just before the next election would be a guaranteed election loser.

There may be some restrictions and certainly some refinement, but it won't be scrapped.

besti

Do you remember how residential property into a pension was received? It was huge.

stray_dog

Zelazny wrote: »

Unless things have changed a lot, you would not be able to do this (and nor would you want to).

There's no reason you can't simply open a new pension to pay into, and no reason you can't then subsequently take the 25% from that one as well.

I thought things had changed a lot, Why wouldn't I just continuing paying into an existing pot rather han open a new one?

Zelazny

stray_dog wrote: »

I thought things had changed a lot, Why wouldn't I just continuing paying into an existing pot rather han open a new one?

Firstly because it's not allowed, but even if it were you wouldn't want to because the existing pot would have been crystallised - this means that the 25% tax free can no longer be taken and a lot more tax has to be paid in the case of death.

Whereas if you paid into a new pot, you could take 25% of it tax free and the benefits in the case of death would be considerably better.

Truthseeker_2

This isn't as big as deal as all that. The fundamental issue is that you will still only be able to withdraw 25% of the pension pot tax free - I wanted this to increase to 50%. The rest of the pot will still be taxed, not at 55% any more but at standard income tax rates, however this won't be an earth shattering change. It will give people more choice, which is good, but all this talk of pensioners blowing the money on sports cars is complete and utter BS. Once the taxman takes his cut there won't be enough left out of the pot, unless you only plan to withdraw the personal tax allowance every year.

The most significant benefit of the change is to ensure that it will be possible in future to inherit the pension pot - something that cannot be done now.

Truthseeker_2

Zelazny wrote: »

Unless things have changed a lot, you would not be able to do this (and nor would you want to).

There's no reason you can't simply open a new pension to pay into, and no reason you can't then subsequently take the 25% from that one as well.

Indeed - this would be a tax fiddle.

reyn_2

Just a thought, under the proposed rules, lets say you have £20k pension coming in from private and state and you want to empty your £500k pot but stay within lower rate tax of 20%. So you have approx £20k year over your existing income to play with, that makes it 5 years per £100k so leaving £200k alone it would take 15 years to get all the £300k at 20% tax.
Correct or not? don't knit pick.
Not correct cos I missed the 25% tax free - so take that away at £75k makes it £225k that's about 11 years.
Be careful what you wish for George might give it to you.

Truthseeker_2

reyn wrote: »

Just a thought, under the proposed rules, lets say you have £20k pension coming in from private and state and you want to empty your £500k pot but stay within lower rate tax of 20%. So you have approx £20k year over your existing income to play with, that makes it 5 years per £100k so leaving £200k alone it would take 15 years to get all the £300k at 20% tax.
Correct or not? don't knit pick.
Not correct cos I missed the 25% tax free - so take that away at £75k makes it £225k that's about 11 years.
Be careful what you wish for George might give it to you.

Yes - this change is not a giveaway, despite all the hysterical comments that some people have posted. It is not a 'game changer'. If the government had made the whole pot tax free, then that definitely would have been a game changer!