Cutting back on pension contributions

Sterlingtimes

The unfortunate message from Government is that many of us should contrive to cut back on our pension contributions. It will be interesting to see how Hargreaves & Lansdown puts a positive spin on the £1 million LTA.

bowlhead99

The logical message would seem to be to increase your contributions as much as possible so that when they lock down the limit any lower, you get grandfathered in with what you've already got.

When someone tries to clamp down on you taking advantage of a benefit - such as the ability to defer current year income until you are at a lower marginal tax rate in retirement, grow the assets and take a tax free lump sum - they are doing that because it is expensive for them to offer such an opportunity. You describe this as them giving us a message that we should cut back on our contributions. But clearly, their message is that they would prefer us to cut back on our contributions because it will cheaper for them; they actively wish to prevent us taking advantage of great tax saving opportunities.

The practical message to me is the exact opposite. It is not that we should contrive to give up on pensions. It is that we should contrive to maximise the opportunities presented to us.

Clearly if you are already close to getting to a £1m pension pot (plus inflation) then you should consider in which years to make future contributions, if any, to maximise the marginal income tax saved or deferred. However while that may be "many" people it will not be "most" people; most can only dream of having a problem like that.

So, I don't see why HL would have a hard problem telling people pensions are valuable and people should make the most of them because the government seeks to restrict what you can put into them because they are expensive for the government in terms of lost tax.