Will The Lifetime Allowance Be Abolished?

redux

peterg1965 wrote: »

I cannot see there being any revolutionary change, in my opinion. The political climate, and the Govt, is too fragile for that. I can see some minor tweaking around pension ‘rules’ but not too much else. Precedent also indicates that a period of consultation is called for before major pensions change, so this could be an option.

Any moves to restrict or radically alter tax relief on contributions are both politically sensitive and also complicated to implement quickly. Mr Hammond needs to find savings and I think the sensible way forward would be to restrict the AA to £30k and what about stopping the ability to ‘carry forward’ AA. I have never really understood why this has not been removed before. It will effect DB pensions, particularly for those who accelerate quickly up pay spines though, but numbers affected will be very small.

I think a sensible path, if there is still a view that pension fund tax relief is too generous after all these years, would be to restrict the relief available to only basic rate.

Even some people using it admit is can be seen as unfair, and share my surprise this hasn't been done years ago.

Maybe Osborne's introduction of the LISA, with its same rate augmentation by government contribution, was intended as a prototype for gradual replacement of pension funds, but it seems like the job wasn't quite finished off.

I don't agree with stopping the carry forward arrangement. Some people's earnings fluctuate from year to year, and their pension contributions might be low or nil in poor years, then they want to catch up.

Before stakeholder pensions were introduced, there used to be carry back and carry forward arrangements, but these were cancelled with the new scheme. I made the same point about fluctuating earnings at the time, on the phone to the Inland Revenue.

Talking of things from then, maybe it's overdue for the £2880 > £3600 annual limit for low and non-earners to be increased; it's been the same since the start.

kidmugsy

redux wrote: »

I don't agree with stopping the carry forward arrangement. Some people's earnings fluctuate from year to year, and their pension contributions might be low or nil in poor years, then they want to catch up.

Hear, hear. It's a characteristic intellectual deformation of people on steady salaries - e.g. civil servants - not to have a clue what life is like for people whose income fluctuates.

stephennt

redux wrote: »

I think a sensible path, if there is still a view that pension fund tax relief is too generous after all these years, would be to restrict the relief available to only basic rate.

Even some people using it admit is can be seen as unfair, and share my surprise this hasn't been done years ago.

Maybe Osborne's introduction of the LISA, with its same rate augmentation by government contribution, was intended as a prototype for gradual replacement of pension funds, but it seems like the job wasn't quite finished off.

I think having a scheme with restricted tax relief would create a bigger mess - the scheme should either be tax on entry and no tax on exit, or vice versa.
Some hybrid scheme where you pay some tax paying in and some more taking out is going to be a pigs ear (and already largely is, with all the various restrictions and contribution limits in place).

Personally I have no issue with tax relief on entry - if "smoothing income" over a number of years is unfair then you'd have to have similiar limitations on retained earnings in personal companies...