will this be possible under the new pension arrangements

wakeupalarm

Because you are getting upfront tax relief in pensions. Previously it was tax deferred now under the new proposals its a free minimum 20% boost, which is not available to Isa's, investment bonds or unwrapped investments. It's got nothing to do with trusting pensioners with their money, I'm surprised that you have been taken in with the spin. Where do you think the tax receipts forgone are going to be replaced by if everyone starts withdrawing their pension pots up to the personal allowance amount? And again why go to all the trouble of ensuring the flat rate pension is cost neutral to then give away billions of pounds in future tax receipts?

You can accumulate £100k in a pension in 2 years if you are a hiagh enough earner and previously in 1 year. To get the same in an Isa would take 6-7 or more years under current rules and almost double that in previous years rules unless you have had spectacular returns. There was a reason why Isa amounts were limited to a much lower amount than pensions and there was a reason why pensions attracted tax relief.

dunstonh

Because you are getting upfront tax relief in pensions.

And you pay tax on the way out too.

Where do you think the tax receipts forgone are going to be replaced by if everyone starts withdrawing their pension pots up to the personal allowance amount?

If everyone does that (which they wont) then the pensions will last a long time.

Then give away billions of pounds in future tax receipts?

Money that will be spent within the economy and create taxation in other areas.

Triumph13

wakeupalarm wrote: »

As for your second point, I'm sure there will be endless articles in the newspapers advising people not to cash in all in one go. Those with modest pension pots can quite easily spread it out over 5-6 years and avoid tax all together.

And using just a single example is not going to eliminate the millions of people with more than modest pension pots who will not pay tax when they previously would have.

Seems people just want to look at these proposals with rose tinted glasses and not consider the wider implications.

Sorry, but your numbers just don't stack up to your 'billions' of tax avoided.
5 or 6 years of PA is about £60k. To get that out tax free you would have to be retiring with no other income 5 or 6 years before SPA. An inflation linked annuity bought with that money would have paid well under £2k pa which even with full SP would mean no tax would ever have been paid. A flat annuity might give £3k pa if you're lucky which would have had no tax paid in the first 6 years you were somehow living on it. After 6 years of inflation on the PA there would almost certainly have been no tax to pay even after SP kicked in.

The only real situation where significant tax is being saved is the couple with one spouse poorly pension provided - where that spouse would almost certainly have only had 20% relief anyway - retiring before SPA.

Anyone getting 40% tax relief was always going to be fully using their PA every year and so will only get a possible tax benefit from the changes if they would have been a 40% tax payer in retirement. The principle impact of the changes is that pension income will be taken at the same 20% rate as previously, but taken out earlier - giving a cashflow advantage to the treasury.