Budget changes: did I miss an announcement?

Snakey

http://www.telegraph.co.uk/finance/personalfinance/pensions/12182776/Millions-of-middle-class-savers-could-lose-out-under-radical-pensions-shake-up.html

Although it's still liberally sprinkled with "could" and "is expected to" and the like, this seems to indicate that we will have pension ISAs with a 20% uplift.

Does anybody know where they've got that from? The language here is a lot less hesitant than previous "he might decide to do this" articles.

Incidentally, on first reading I struggled to see how "no tax relief on contributions but a 20% uplift on anything you pay in" was more beneficial than "tax relief on contributions restricted to 20%" as it seemed to me that the former gave you less. Then the penny dropped that the former would be tax-free on the way out whereas the latter would still be taxed (albeit with 25% tax-free). I just thought I'd share that realisation with you in case anybody else was thinking the same.

chucknorris

Snakey wrote: »

http://www.telegraph.co.uk/finance/personalfinance/pensions/12182776/Millions-of-middle-class-savers-could-lose-out-under-radical-pensions-shake-up.html

Although it's still liberally sprinkled with "could" and "is expected to" and the like, this seems to indicate that we will have pension ISAs with a 20% uplift.

Does anybody know where they've got that from? The language here is a lot less hesitant than previous "he might decide to do this" articles.

Incidentally, on first reading I struggled to see how "no tax relief on contributions but a 20% uplift on anything you pay in" was more beneficial than "tax relief on contributions restricted to 20%" as it seemed to me that the former gave you less. Then the penny dropped that the former would be tax-free on the way out whereas the latter would still be taxed (albeit with 25% tax-free). I just thought I'd share that realisation with you in case anybody else was thinking the same.

This is the first that I have heard this being promoted as 'likely to happen' (as opposed to merely an available option to the chancellor). From the link it states:

The “pensions Isa” proposal has emerged as a front-runner after plans to scrap higher rate tax relief and replace it with a “flat rate” of as little as 20 per cent met with resistance from Tory MPs.

So it is probably a clue form someone in the know, but it doesn't sound certain yet. Interesting to hear though. Presumably existing pensions would carry on as they were, but no more could added to the schemes?

Kendall80

What 'appears' to be the most likely option from the media i've consumed is a change to the rate of tax relief to a flat rate in the region of 25-33%


This would seem to benefit the majority of people and fit in with the government agenda of encouraging more people to save for retirement. Of course, it doesn't feel inherently 'Conservative' so uncertainty remains, at least in my eyes.

dunstonh

Just remember last year and the articles of "15 things you will see in this years budget". none of which turned out to be correct.

Nobody knows. There could even be misinformation being put out to allow a rabbit out of the hat.

PensionTech

I'd also be wary of the way in which any figures are presented. I have read two different articles in the last five minutes that present a "top-up" (at varying levels) as a percentage of your net contribution. Example:

"The Telegraph reports that the Government plans a 20% bribe - for every £5 saved, the tax man will add £1 to reward you for locking it away until retirement in the PISA."

That is not the same as 20% tax relief now. 20% tax relief means that the taxman adds £1 for every £4 saved. It may be natural to describe a top-up as a percentage of the figure that is being topped up, but it is not directly comparable to the current system of tax relief.

kidmugsy

chucknorris wrote: »

Presumably existing pensions would carry on as they were, but no more could added to the schemes?

Unless they want rioting on the streets, yes.

Aretnap

chucknorris wrote: »

Presumably existing pensions would carry on as they were, but no more could added to the schemes?

FWIW the Mail is suggesting that the change would only apply to young people starting a pension for the first time - so more could presumably be added to existing schemes.

http://www.dailymail.co.uk/news/article-3475761/Osborne-axes-plan-target-middle-class-pension-pots-backlash-Tories.html

Seems to be the day for flying a lot of kites over Whitehall. We'll find out on the 16th.

Edited to add link which for some reason I forgot.

michaels

Does anyone else find it annoying that potentially we only get 2 weeks to completely re plan and then rejig our finances between the budget and the start of the next financial year

redux

PensionTech wrote: »

I'd also be wary of the way in which any figures are presented. I have read two different articles in the last five minutes that present a "top-up" (at varying levels) as a percentage of your net contribution. Example:

"The Telegraph reports that the Government plans a 20% bribe - for every £5 saved, the tax man will add £1 to reward you for locking it away until retirement in the PISA."

That is not the same as 20% tax relief now. 20% tax relief means that the taxman adds £1 for every £4 saved. It may be natural to describe a top-up as a percentage of the figure that is being topped up, but it is not directly comparable to the current system of tax relief.

To be fair, even Martin Lewis is prone to similar sloppy maths.

His car fuel economy article still hasn't been corrected after several years.

If anyone thinks that improving consumption from 50 to 60 mpg is a 20% improvement, they need to think again. Clue: consider how much fuel is used to travel 300 miles.

michaels

Under the current scheme next year I will add about 85k to my pension and receive 13.5k in benefits

If pensions (employer and employee contributions) are replaced by a 20% top up P-ISA I will still get 11k benefits but only pay about 56k into my p-isa.

Lets assume the 85k is worth 72k after tax (25% tax free, rest taxed at 20%) then I am a stunning 18.5k or 30% of my gross salary worse off.

Remind me again why I voted for this?!

Sterlingtimes

michaels wrote: »

... I am a stunning 18.5k or 30% of my gross salary worse off.

Remind me again why I voted for this?!

There was no vehicle for Conservative voters to punish Osborne. Now there is (-:

Those of us in the last few years of work are very worried. If the Daily Mail and the Daily Telegraph had the same squealers in the Treasury then our concerns could be relieved. At this stage it is painful.

I have asked Hargreaves & Lansdown for a drawdown quote which I can act upon on Budget Day if necessary. I am pondering whether to crystallise before Budget Day to benefit from the present £1.25 million LTA and tax grab my 25% while the going's good. I will keep my ears to the ground over the next few days for any authoritative indications as to what will happen.

At present it seems as though the Treasury is speaking for Parliament.