Annual Allowance £40,000

Mick70

does this not increase yearly with inflation ?   seems bit daft if it remains capped , unless im missing something, which is often the case

Mick

hugheskevi

No, it is frozen in cash terms. Daft is an appropriate word to describe a lot of the pension tax changes in recent years.

Mick70

just simply as this 40k annual limit reduces in real value year on year , surely it should be inflated If the lifetime allowance is being inflated ?

Albermarle

Mick70 said:

just simply as this 40k annual limit reduces in real value year on year , surely it should be inflated If the lifetime allowance is being inflated ?

There is no 'surely' about tax changes. The government decides . LTA and AA have been reduced drastically over recent years to restrict very wealthy people abusing the generous pension tax regime. It is probably more surprising that the LTA does increase with inflation, rather than the AA does not.
One point that is unfair is that the amount you can contribute with no income has been stuck at £3600 for years.

Mick70

Albermarle said:

Mick70 said:

just simply as this 40k annual limit reduces in real value year on year , surely it should be inflated If the lifetime allowance is being inflated ?

There is no 'surely' about tax changes. The government decides . LTA and AA have been reduced drastically over recent years to restrict very wealthy people abusing the generous pension tax regime. It is probably more surprising that the LTA does increase with inflation, rather than the AA does not.
One point that is unfair is that the amount you can contribute with no income has been stuck at £3600 for years.

yes that amount is far too low for people to provide themselves with a pension

Thrugelmir

£40k pa limit is sufficient to provide people with an adequate pension provision. 

ratechaser

Thrugelmir said:

£40k pa limit is sufficient to provide people with an adequate pension provision. 

I have to agree, I fully expect that once the current government spending spree needs to start being repaid, these limits will come down quite a bit further. 

It's quite embarrassing just how much tax efficiency I get from pensions every year, given that I'm by any reasonable definition a high earner. I consider myself fortunate and I don't think my children will get the same benefits...

Thrugelmir

Inflation will do the heavy lifting. Gentle erosion goes unnoticed. 

Mick70

Thrugelmir said:

£40k pa limit is sufficient to provide people with an adequate pension provision. 

if they were paying that in from an early age i would agree , but realistically the vast majority are only ever in the position to do this in the later stages of their careers .  I agree about possibly putting an end to the extra tax relief higher earners can claim through their annual tax returns , but not to reduce the annual amount you can pay in (including the govt top up), should be encouraging pensions not discouraging them

Mick70

ratechaser said:

It's quite embarrassing just how much tax efficiency I get from pensions every year, given that I'm by any reasonable definition a high earner. I consider myself fortunate and I don't think my children will get the same benefits...

in what way ?  everybody is entitled to the additional relief that the govt pays into your pension .
The one difference high earners get is that they can claim additional tax relief back via online tax returns ,  which I would agree may well get stopped , other than that part everyone is in the same boat .  or they could reduce LTA or stop tax free lump sums once access pensions possibly. 

ratechaser

Mick70 said:

ratechaser said:

It's quite embarrassing just how much tax efficiency I get from pensions every year, given that I'm by any reasonable definition a high earner. I consider myself fortunate and I don't think my children will get the same benefits...

in what way ?  everybody is entitled to the additional relief that the govt pays into your pension .
The one difference high earners get is that they can claim additional tax relief back via online tax returns ,  which I would agree may well get stopped , other than that part everyone is in the same boat .  or they could reduce LTA or stop tax free lump sums once access pensions possibly. 

... or with Sal sac 'they' can get effective 47% relief without even having to worry about a tax return (in my case I had some of that and also some into a separate scheme so I did have to use self assessment as well). And the taper threshold has gone up by 90k as well!

I suspect 'something' will be done here , although the problem with lowering LTA is that with annuity rates as they are, even a pot of a million quid doesn't exactly buy you a substantial income. Not that I'm going down that road in any case.