New Pension freedoms - Outcome of Consultation

gadgetmind

jamesd wrote: »

the annual allowance for pension contributions has already been hugely reduced from over £200,000 to £40,000

It used to be a %age of earnings based on age, then went to £255k, then £50k, after which we had the £20k/£30k special annual allowance crazies, and we finally seem to have settled on £40k. Of course, next year it might be £250k or 50p, such is the disdain that HMG have for those relying on Defined Contribution for their retirement. "All plan for your retirement", they say, "stop running around with the goalposts", we reply.

hugheskevi

"All plan for your retirement", they say, "stop running around with the goalposts", we reply.

I agree

Personally both the wife and I are in DB schemes with NRA 60 and protected minimum pension ages of 50. I intended to draw the pension at the earliest possible age (ie 50). The consultation response states on this matter:

Some individuals have built up savings with a right to access those benefits from an earlier pension age. The government recognises that they will be affected by an increase in the minimum pension age, and is considering the nature and extent of any protection that might be required for those individuals. The government will be guided by simplicity and fairness, both for individuals and for schemes, in designing any protection that may be introduced.

Recognising that there are further issues to explore in designing an increase to the minimum pension age, subject to the will of Parliament the government will legislate for these changes in the next Parliament

Or to paraphrase, we know that some people have protection entitling them to a lower minimum pension age, that our proposals might remove that protection, and don't know what we'll do yet. We'll do something at some point in the future.

That is a deeply unsatisfactory state of uncertainty, exacerbated by knowing I'm in a minority of people who would be affected (ie why would a politician be bothered), and not in a group (of those who can afford to retire at 50) who would get any sympathy (ie why would a politician be bothered).

If the rules change so that my minimum pension age becomes 58 or 59 (my likely State Pension age less 10 years) then these DB pensions will be about 60% higher than I had planned, meaning I will already have as much in pensions as I would want with several years of DB accrual remaining. It isn't a bad problem to have I guess, and I'd work around it by some form of mortgaging probably, but I would just like to be able to get on with planning and saving not having to second-guess which direction pension policy will lurch to next. Even considering removing historic protections already granted should not be on the table given its retrospective nature (in my opinion).

I'd prefer to be treated consistently rather than 'fairly'

EDIT: Bah, just thought, having to crystallise at age 58/59 will also use up a lot more Lifetime Allowance than a crystallisation at age 50 That would become an issue too.

jamesd

Since 2.31 says the current system will be grandfathered I expect it to include the 150% since that's part of the current system. It's also variable without legislation I think so it could change at any time even with grandfathering.

System

gadgetmind wrote: »

In future, anyone who draws down anything beyond 25%, will have the £10k annual allowance imposed.
?

Does that mean 25% of total value of all pensions, or just 25% of each pension?

If someone takes 25% of one pension and continues contributing to another, will the eventual 25% of that pension be added on to the 25% of the other pension, taken perhaps 10 years previously?

gadgetmind

At the point you take the 25% from a pot, you "crystallise" that particular pot. Other pots (and new pots) can remain uncrystallised so further 25%s can be taken from them in the future. Crystallised pots can't have any more money added.

jamesd

It's up to 25% of each uncrystallised pot. Crystallised pots are ignored for the calculations.

You can't pay into a crystallised pot but you can merge in another crystallised pot at the same provider. Places like HL typically use one for all of the pots that are crystallised there, adding money to that one as more is crystallised. Transfers between providers need to be into different arrangements/pots. An "arrangement" is the technical term for a particular piece of a pension pot and quite a lot of the rules that we describe as pots here are really related to arrangements.

Scottish Widows has an interesting example of 100 arrangements of £280 each being consolidated into three arrangements of £9333.33 that can then all be taken under the small pot rule.

What you can't do is split a crystallised pot. For that reason it might be useful to deliberately create several arrangements so you can move each to the best place for the type of investment it holds.

gadgetmind

jamesd wrote: »

What you can't do is split a crystalised pot. For that reason it might be useful to deliberately create several arrangements so you can move each to the best place for the type of investment it holds.

Thanks, I didn't know that!