Opinions on SIPP and LTA.

EdSwippet

kidmugsy wrote: »

But what are you proposing: the bubble continues for ever?

Nope. But a 30% crash doesn't offer any LTA escape if it is preceded by a 30% rise. And I am pretty sure that some markets have risen that much or more over the period that you have been predicting the 'coming crash' as a way to sidestep LTA issues.

No prediction of a crash is actionable unless accompanied by a statement of when it will occur. And most predictions of a crash that do state when it will occur turn out to be entirely wrong.

kidmugsy

EdSwippet wrote: »

most predictions of a crash that do state when it will occur turn out to be entirely wrong

Most? Almost all predictions of anything much turn out to be entirely wrong.

bearshare

I am not TOO adverse to paying tax on real growth. Paying it because my holdings have gone up due to inflation rankles. Paying it without any CGT allowance AND at at higher (income) tax rates would rankle even more.

If i crystalise the lot now, and reach eg 80% of LTA, then I can still get some benefit from indexation of the LTA in he future. Say 10 years at 3%, call it 35%, so the LTA would then be £1.35m. So the SIPP could grow by £270k without any drawdown, before hitting the new LTA.

Probably still paying higher rate tax on it anyway, so not sure there is any REAL advantage.

EdSwippet

bearshare wrote: »

I am not TOO adverse to paying tax on real growth. Paying it because my holdings have gone up due to inflation rankles. Paying it without any CGT allowance AND at at higher (income) tax rates would rankle even more.

In a sense though, these were 'known unknowns' all along in pension saving. By putting money away and taking immediate tax relief, you always ran the risk of finding yourself in a higher tax bracket on withdrawals than during contributions. The compensation for this is the 25% tax-free lump sum, and the compounding of income on the tax-deferred funds in the first place. Both are well worth having, and give pensions a decent edge over saving in vanilla taxable accounts.

The part that rankles most with me is the Lifetime Allowance. Not so much its presence (although on its own it is bad enough) as its repeated reductions to what is now around 1/3 of its inflation-adjusted initial value in 2006. That is more of a past 'unknown unknown', with effectively retroactive effects. Had I known it was coming I would have put less into pensions in the past so that I could put more in later on. If you are above age 55 then this is also the only part you have somewhat fine control over, by timing pension crystallisation to tailor things to your circumstances.

Paying ordinary income tax on pensions is part of the deal made earlier. But paying a 25% surcharge because the government then changed the rules late in the game? Personally, no. Not paying that.