Tax free lump sum and multiple pensions?

zolablue25

dunstonh wrote: »

There are caveats. Some people have a protected scheme age. Some schemes wont allow earlier than 60/65. Some schemes have safeguarded benefits which may not be able to allow earlier commencement within the same plan.

However, if its a bog standard money purchase scheme with no transitional reliefs or safeguarded benefits, then its 55. It is going up to 10 years less than state pension age in 2028. However, the act of parliament to put that in place has not appeared. However, the Govt have not officially dropped it. The last official bit of news, IIRC was back in 2016 when the Treasury said they still intend to stick to it going to 57 and then 58 but its been quiet since. It was an Osborne decision. Hammond has had plenty of chances to include the lines in various acts. If we see a change of Government, this may never happen. Best to assume it is going to but dont be surprised if it doesnt.

I will be opening a SIPP for myself and one for my wife this year and these are the plans that I will be loading up with especially if I can get at 25% of my money when I'm 55 (we are both 52 at the moment)

@MND, I wasn't aware of a £4K restriction, so thanks for the info, Is that £4K per annum or total?

Mnd

It's 4000 per annum if you take any taxable cash. (Even if you don't pay tax)
You are allowed the 25% but no more

Paul_Herring

zolablue25 wrote: »

... and they are trying to make pension saving as attractive as possible.

Except for small things like the lifetime allowance...

zolablue25

Paul_Herring wrote: »

Except for small things like the lifetime allowance...

Ah yes, but to be fair, if you can afford to put in your lifetime allowance you probably aren't going to be relying on a state pension once you retire.

I was talking mainly about Mr Average who, like me, put off pension planning until it was, to all intents and purposes, too late to put enough aside to be able to live without a state pension.

Paul_Herring

Given that the

• LTA has gone more down than up recently, and
• when it did go up for this tax year it was only by inflation *
• thus anyone in their 20's/30's putting in a not stupidly small amount will bump up against that limit well before retirement

I'd consider that a major disincentive, especially when what £1m will (or rather wont) be able to buy in a couple of decades.

====

* If your investment, any investment, is only increasing by inflation, you'd better start looking to see if it's actually in the right place. And of the inflation measures they had to choose from, they chose CPI.

zolablue25

Paul_Herring wrote: »

Given that the

• LTA has gone more down than up recently, and
• when it did go up for this tax year it was only by inflation *
• thus anyone in their 20's/30's putting in a not stupidly small amount will bump up against that limit well before retirement

I'd consider that a major disincentive, especially when what £1m will (or rather wont) be able to buy in a couple of decades.

====

* If your investment, any investment, is only increasing by inflation, you'd better start looking to see if it's actually in the right place. And of the inflation measures they had to choose from, they chose CPI.

True but its a balancing act for the Government. Encourage as many people as possible to provide for themselves, to a reasonable degree, without losing too much in tax income.

Wish I had reached my LTA, I wouldn't be worrying about what I'm going to do in retirement if it had.

"I'd consider that a major disincentive, especially when what £1m will (or rather wont) be able to buy in a couple of decades."

If the LTA is increased in line with inflation then the LTA will buy in a couple of decades time pretty much what it will buy today. Of course, that depends on the LTA being increased.

I still think a Conservative Government wants to encourage most peopel to save for their retirements (but they have limits). Of course, if Jezza gets in there could be a complete about face

Edit: This link is enlightening https://www.moneyadviceservice.org.uk/en/articles/the-lifetime-allowance-for-pension-savings
It suggests that you will be OK on a DB pension of £51,500 pa. Given that is approximately twice the average earnings, that doesn't seem like too many people will encounter this as a problem

Paul_Herring

Given that CPI is seen as the unfair benchmark to pin benefits to and to change pensions in payment to (from RPI,) I fail to see how it's any fairer to pin something that should be increasing well beyond it, to it.

Again - it's not an incentive.

It suggests that you will be OK on a DB pension of £51,500 pa. Given that is approximately twice the average earnings, that doesn't seem like too many people will encounter this as a problem

"I wouldn't have a problem with it (despite not being near that situation anyway,) therefore I don't see why anyone else should see it as a problem"

OK.

System

Paul_Herring wrote: »

Given that CPI is seen as the unfair benchmark to pin benefits to and to change pensions in payment to (from RPI,) I fail to see how it's any fairer to pin something that should be increasing well beyond it, to it.

Again - it's not an incentive.



"I wouldn't have a problem with it (despite not being near that situation anyway,) therefore I don't see why anyone else should see it as a problem"

OK.

CPI is generally lower than RPI, but it is a better measure of inflation so it is not an unfair measure of inflation!
Regarding the LTA, my view is that when you hit the LTA then it is time to retire. I assume that by reducing the LTA the government wanted to increase early retirement. If not then it was rather foolish.

Paul_Herring

CPI is generally lower than RPI, but it is a better measure of inflation so it is not an unfair measure of inflation!

My point was whether any measure of price inflation should be simplistically used in determining future income, as it has been here. (It wasn't even CPI+<reasonable growth for a pension>%] - it was just CPI.)

If so then all wage inflation/increases should be set at CPI - no more, no less, even if getting a promotion - then everyone would be happy bunnies!

Except those that wouldn't be, of course.

zolablue25

Paul_Herring wrote: »

"I wouldn't have a problem with it (despite not being near that situation anyway,) therefore I don't see why anyone else should see it as a problem"

OK.

Just checking, is that a dig at me or not?

If it was and you are implying I am using a "I'm alright Jack" kind of argument, I'm not. I'm not even trying to defend the LTA. All I'm saying is that the Government is trying to encourage as many savers as possible to invest in a pension (so they can pay less state pension at a later date) and, at the same time, limit those that they feel may be abusing the system and avoiding paying tax.

Of course, this is only my reading of
a) the ongoing affrodability fo the state pension
and
b) the introduction (and subsequent reduction in) the LTA

I could be wrong. They may, in fact, be wanting to discourage people from saving into a pension (although that flies in the face of the introduction of the Workplace Pension).

The truth is that a lot of people don't prioritise saving for a pension for a number of reasons. One of those reasons is that Governments keep messing about with the rules and it gives no-one any confidence in running a savings account for 50 years when the rules change so regularly.

Who's to say that those people in their 20s that are starting to save in a workplace pension will even encounter a LTA by the time they retire. In the next 50 years it could be abolished, increased or decreased