One-off contribution help - so unfair!!

Youngpensionsaver

kidmugsy wrote: »

"so unfair!!" And you claim to be thirty-five. God spare us.

Thank you for that intervention. I expected some negative comments to a genuine situation. As we all do, I work hard and long hours to earn my living and all I want to do is keep what is rightfully mine (to ensure I can support my dependent young family). I personally begrudge tax avoidance but I wholly sympathise with those trying to make retirement income as efficient as possible as I worry for the state of this country in 30yrs without continued mass immigration to support our worsening demographic imbalancing.

grey_gym_sock

Youngpensionsaver wrote: »

Pension pot: £150k, miles off the £1m cap and under this government I will never get there!

One-off capacity calculated as £120k

why don't you expect to reach the £1m cap?

supposing you get the pot up to £270k now, and then add £10k a year.

the earliest you might get access is after 22 years (i.e. at age 57).

with those contributions, you'd need about 4% compound growth to reach £1m after 22 years. since the £1m limit is supposed to be index-linked (starting in about 2 years' time), that effectively means you'd need an investment return of about 4% more than inflation. not guaranteed, but perfectly possible with an aggressive portfolio.

I worry about the state of the nation's pension savings in 30 years!

very funny. you might worry about how much pension low earners will be getting. 45% is a very low top rate of tax. just get used to paying it, and invest your after-tax income. there's nothing that says that all your retirement savings have to be in something called a pension.

RickyB2000

Youngpensionsaver wrote: »

Thank you for that intervention. I expected some negative comments to a genuine situation. As we all do, I work hard and long hours to earn my living and all I want to do is keep what is rightfully mine (to ensure I can support my dependent young family). I personally begrudge tax avoidance but I wholly sympathise with those trying to make retirement income as efficient as possible as I worry for the state of this country in 30yrs without continued mass immigration to support our worsening demographic imbalancing.

You have £95k you can tie up for 22 years - doesn't sound like you are struggling to support your young family. Guessing that you are living well below your means, you could easily be financially independent long before retirement age. Why not consider that rather than tying it all up for 22 years and spend time with your young family? Or do you already have large, easily accessible savings/investments and this is to just squeeze a bit more performance out of spare cash?

princeofpounds

I am still amazed when anyone earning a six figure salary believes that there is a need for the government to incentivise them to make provision for their old age!

The private pension system has been based for years on a system of deferred taxation.


This is very different conceptually to an incentive. Although it may function as one, by design.


All the salary kept in a pension is untaxed, yet taxed fully on the way out.


If the government want to change things to a system where, for higher earners, the money is partially taxed on the way in, and then fully taxed all over again, it ruins the whole principle of the system to date.


That might be a good policy decision, or it might not. But it's a more fundamental change of principle than people realise.


Personally I think it's a terrible policy change. If they want higher earners to have less access to the tax break, it would simply be fairer to limit the amount of contributions (and through a less clumsy mechanism than the LTA system preferably)

RickyB2000

Ah, but the 'loophole' people will say is you defer your marginal high tax rate for a much lower tax rate in retirement.

ratechaser

kidmugsy wrote: »

"so unfair!!" And you claim to be thirty-five. God spare us.

Steady on. The OPs situation is pretty similar to where I was at 35, the difference being that at least I've had a few years to max out my contributions. Given that I've always taken the MSE ethos to be one of 'save for tomorrow' where possible, it's just a tad hypocritical to throw out snarky comments when someone is trying to do just that, simply because they are better off than the average person.

Anyway OP, I think your specific questions have been more or less covered, all I'll throw out is that I would definitely take full advantage of these contribution limits while they still exist. At 35 my pot was around 100k, it's very substantially more than that now and I would have been kicking myself if I'd not taken advantage prior to the changes that are either planned or being hinted at.

PensionTech

Pay very close attention to 'pension input periods'. These days many (most?) are aligned with tax years, but it is not always a dead cert. If your plans have odd PIPs you will want to be very careful about checking that both past and future contributions fall into the expected tax years.

Nope - they're all aligned to tax years now. https://www.gov.uk/government/publications/pensions-technical-note-transitional-provisions-for-aligning-pension-input-periods/pensions-technical-note-transitional-provisions-for-aligning-pension-input-periods

The point about past PIPs is valid though, for pre-8/7/15 contributions.

EdSwippet

Youngpensionsaver wrote: »

Thank you for that intervention. I expected some negative comments to a genuine situation. As we all do, I work hard and long hours to earn my living ...

There is apparently a perception, perhaps held by some of these commenters, that if it is possible to earn £30k/year (inflation adjusted) constantly over a 40 year career, it is equally possible to earn £230k a year constantly over the same career span. That probably isn't the case.

Some occupations require lengthy periods of low remuneration work or training ahead of shorter periods of potentially higher salary. Medical professionals, elite athletes, probably most people who start a business, to name a few. All take the risk that the higher salary this training brings will outweigh the lead time to gain the required knowledge.

Pensions allow one to smear income both into the future and, effectively, also into the past. With its short-notice reduction in all these pension allowances, the government is lowering the reward for short-run high-salary careers. This shifts the risk/reward equation.

Budding doctors or entrepreneurs some way from starting out may now instead choose safer careers in civil service. Those who will feel most betrayed are those who have recently finished training and are at the brink of the high earnings as payoff for prior hard work. They see a door slammed in their face at a point when it is too late to change direction. For them, other countries may well beckon.

Long story short, we are now at the point where pension rules apparently favour long-run mediocrity over riskier short-run brilliance. This doesn't seem like a recipe for economic success.

EdSwippet

PensionTech wrote: »

Nope - they're all aligned to tax years now...

Yup, thanks for picking that up. It's the past years that need careful inspection.

OldBeanz

I think anyone using an internet forum that declared an income 8/9 times more than the national average, stating that tax is unfair and who asked for comments on his "individual position" may be pointed in the direction of those who are struggling to meet their basic needs.