Budget

madeinireland_2

Did I hear it correctly today - we will have to pay NI now for any redundancy payment over £30k?

And if this is true when does it come in?

Thanks...

taylornj

madeinireland wrote: »

Did I hear it correctly today - we will have to pay NI now for any redundancy payment over £30k?

And if this is true when does it come in?

Thanks...

Yes I heard that one. April 2018 when I looked.

zagfles

madeinireland wrote: »

Did I hear it correctly today - we will have to pay NI now for any redundancy payment over £30k?

And if this is true when does it come in?

Thanks...

Employers, not employees.

zagfles

cheesetoast wrote: »

They've said that they'll "consider releasing money in a Lifetime ISA for other events also".

Call me cynical, but...

"Hi, I've been made redundant, and need to claim benefits please"
"No need for that, Sir - I can see that you've got £10,000 in a Lifetime ISA. I'll just release that for you, and you can live off it for the next year..."
"But... but... that's for my pension"
"Shut up"

"I've just been made bankrupt. At least they can't touch my pension..."
"Well no, but we can release the money in your Lifetime ISA for the Official Receiver to pay off your debts with..."
"How will I have anything to retire on?"
"Shut up"

"I've been overpaid some benefit. Can I pay it back at a few pounds a week?"
"Don't worry, Madam - we'll release it from your Lifetime ISA..."
"No, I'd rather pay it off over time and protect my savings"
"Shut up"

Yes this definitely needs clarifying - how it'll count for means tested benefits and creditors. If it counts as capital for means tested benefits it will be a rubbish retirement savings vehicle as you could lose your entire "pension" if you lose your job.

zagfles

PensionTech wrote: »

How do you work that out? I make it equal (assuming BR taxpayer in work and in retirement, pay in £68, gross contribution £100, get back £25 tax-free, £60 net of tax for total of £85; under PISA, pay in £68, fund value £85, get back £85).

Yup exactly the same assuming the employer doesn't rebate any of their NI saving.

Not allowing for compound interest,

That won't make any difference. Same interest, same outcome.

moving down tax bands, higher access age, (much) lower annual allowance or employer contributions though - all of which work in favour of pensions.

Though for people who earn less than the personal allowance, it'll be better than sal sac. Wonder if it'll be an alternative to automatic enrolement for people on low incomes?

Nozama

zagfles wrote: »

Yes this definitely needs clarifying - how it'll count for means tested benefits and creditors. If it counts as capital for means tested benefits it will be a rubbish retirement savings vehicle as you could lose your entire "pension" if you lose your job.

IMO this account should be treated as "fixed term" savings account rather than a pension. It should make no difference to means tested benefits as if you have this amount in savings you wouldn't be eligible for benefits anyway.

If you put the same money in a pension you wouldn't have access to it until you retired even if you did lose your job.

The killer is the loss of interest (why?) and the 5% charge for early withdrawal. Loss of the bonus should suffice.

PensionTech

Not allowing for compound interest,
”That won't make any difference. Same interest, same outcome.

Absolutely makes a difference. Upfront tax relief means that there is more in the pension to start with. Therefore more interest.

Snakey

PensionTech wrote: »

Assuming BR taxpayer in work and in retirement, pay in £68, gross contribution £100, get back £25 tax-free, £60 net of tax for total of £85; under PISA, pay in £68, fund value £85, get back £85.

Thanks for that - I hadn't thought it through and was thinking that it didn't sound like that generous of a deal. I was forgetting the implications of it being tax-free on the way out (although it assumes you'd have other income soaking up your nil-rate band, so no early retirement there).

Not allowing for compound interest, moving down tax bands, higher access age, (much) lower annual allowance or employer contributions though - all of which work in favour of pensions.

All good points. The main advantage is being able to access it for a house deposit, I think. That's what I'd be looking to use it for, were I younger and un-be-housed (I make it anyone born on or after 6 April 1977 will qualify).

Personally, despite not qualifying for this one, I'm happy enough with the increase in ISA maximum limits. The Lifetime ISA is only worth an extra grand a year, when all's said and done - lots of money when viewed in total over 32 years, and also if you haven't got anything (especially if there are two of you saving for that house together), not so much if you're already set up.

One of my hoped-for predictions (one of my ten zillion predictions, so I claim no applause - stopped clocks and all that) was that if they did introduce a new pensions ISA it would be in conjunction with a higher retirement age while quietly not touching the age for "old-style" pensions. I see they've pegged the LISA at 60, but no announcement about moving the normal pension access age up to match it. Fingers crossed they'll "forget" to do this, make lots of future changes to LISA limits so that they more or less become PISAs as time passes, and just allow everything to work through the system over the longer term so that us over-40s get a bit of a win that way. Obviously under-40s still get to pay into pensions as well, so I guess there'd be an increase on the cards one day, but... not until I'm alright Jack?

Nozama

PensionTech wrote: »

Absolutely makes a difference. Upfront tax relief means that there is more in the pension to start with. Therefore more interest.

Excellent point, however doesn't it also introduces some uncertainty with regard to future tax rates. In 20 years' time the political and global landscape may be quite different, what's to stop a future Government putting up the rate of tax to a level that would wipe out or exceed any gains from the interest accrued?

zagfles

PensionTech wrote: »

Absolutely makes a difference. Upfront tax relief means that there is more in the pension to start with. Therefore more interest.

Yes but there is therefore more tax to pay when you take it out!! It makes absolutely no difference to the end result!

Using your example:

I make it equal (assuming BR taxpayer in work and in retirement, pay in £68, gross contribution £100, get back £25 tax-free, £60 net of tax for total of £85; under PISA, pay in £68, fund value £85, get back £85). Not allowing for compound interest,

Say compound interest at 5%.

Pension: pay in £68, grossed up to £100. Grows at 5% compound for 30 years, so grows by 4.3219 times giving £432.19.

25% tax free, taxed at 20% on 75% of it, gives £367.36 after tax.

LISA: pay in £68, with bonus added gives £85, grows at 5% compound so multiply by 4.3219 so £367.36