In light of the latest budget, will you be tweaking your long term budget planners?

Alexland

DT2001 said:

We are pretty much at our rough number. So we decided that any inheritance we were due to receive would be passed on immediately preferably by a will change.

Our little kids are too young to be trusted with it for at least another 20 years but yes we don't need any inheritance in our estate so I guess it would be a case of passing it on as soon as I had enough confidence it would be safe with them.

DT2001 said:

If you put money in an ISA it will support your early retirement plan. You could continue post retirement to put in £3.6k to top up funds outside IHT. It is a balancing act and partly depends on how strong the desire to retire early is.

I was planning on doing that anyway with some of the excess LISA money (we have already invested enough to gift our kids house deposits) so any extra released money would get recycled into my wife's pension. You're right what matters is that we want to retire very early so no this budget hasn't changed our plans we are going to be putting more money into S&S ISAs before the end of this tax year.

kinger101

NedS said:

kinger101 said:

Short answer no.

Long answer, for tax allowances such as the personal allowance, it's unreasonable to assume they'll move according to inflation for the rest of your life anyway so I don't see the benefit in planning for these.  I doubt income tax rates will be 20 % and 40 % by the time I retire too.

It was reasonable to assume that because it was written into law that personal income tax allowances would rise in line with CPI inflation. Up until yesterday when the Chancellor changed the law. Now they are frozen until 2026, so it would be equally reasonable to assume that will be the case, until the law changes again, and to update any financial planning accordingly. I think the law is a pretty good determinant as to what is reasonable?

In case you hadn't notice it, chancellors change tax laws at least annually, and are not bound by previous decisions they made themselves, let alone their predecessors.

mightbedave

It's a very nice problem to have but I am seriously considering paying a lot less into my pension now because of the lifetime allowance and tax band freezes. I feel the lifetime allowance will be an easy target in future too. At present I am paying a lot into my pension to keep taxable income below 50k and avoid repaying child benefit (3 kids). I have also assumed that 40% tax relief on pension contributions will be reduced at some point.

If current pay progression continues (fingers crossed) I'll soon be hitting the annual allowance, and although I'm a long way off it at the moment with 15-20 years more work and modest investment growth I will hit the LTA. 

I'm starting to think, forget the pension for a bit, pay the tax and spend more money now. Enjoy life while we are all fit and healthy and hopefully the pandemic is over. 

green_man

I had planned to take one UFPLS each year such as to use my whole personal allowance, this withdrawal being the bulk of my yearly income (topped up via an income portfolio).  

This change obviously means my UFPLS payments will be static until 2026 (at least).  

So I either -
1- live on current income levels for next 5 years (might be doable depends on inflation)
2 - increase UFPLS anyway and just pay any tax due, this is what the chancellor wants me to do (my pot should support this unless we have a 10 year crash, even then I’m holding quite high cash % at the moment)
3 - increase the amount I take from the income portfolio. There is some small headroom here (maybe 10%) but I want to allow for potential dividend reductions in next couple of years, and I certainly don’t want to draw down on capital. 

My initial thought are to start with 1, see how I go. If I need more money then move to 2.  3 will only be considered if there are unexpectedly large increases in my income portfolio dividends in the next couple of years.

DairyQueen

I need to tweak our income projection spreadsheet to account for the frozen tax allowances.  We are front loading drawdown.

Biggest concern is that inflation takes-off. We would then need to decide whether to reduce income (in real terms) to avoid HRT, or maintain inflation-linking on drawdown and take the extra tax hit.

Mr DQ is in danger of breaching the LTA unless he draws down sufficient from his SIPP before the age 75 BCE so that's another factor to add to the mix. Thankfully he has 2016 LTA protection - a real bonus at things have turned-out.

It may be worth Mr DQ deferring his SP. The possibility of doing so has now increased. Depends on inflation, the real value of the deferral premium going forward and investment growth. 

Then there's the extended freeze on the inheritance NRB to consider. IHT will become a factor in the financial plans of many more of us.

The pain will be deferred until next year but then it will begin to hurt. The train carrying a shedload of pandemic invoices is hurtling down the track and there is no avoiding it. Most of us will have less disposal income to spend and, perhaps, considerably less if inflation takes a hike. How much this will impact the economy of UK plc. is anyone's guess. 

I heard a nurse pitching for a 15% pay increase on the radio today. So, it starts. 

What does my crystal ball tell me:

- Reduced investment returns and increased volatility
- Clamours for above-inflation pay rises and associated industrial unrest
- Big increase in appreciation for index-linked, guaranteed pension income
- A dearth of interest in DB transfers
- A large increase in DB transferees seeking compensation
- A move to cash.
Just for starters.

Notepad_Phil

DairyQueen said:

It may be worth Mr DQ deferring his SP. The possibility of doing so has now increased. Depends on inflation, the real value of the deferral premium going forward and investment growth.

That's a really good thought - we were considering delaying SP for Mrs Notepad given that I reckon she has a very good chance of making it to her nineties, but I can see that there might now be circumstances where it could be for me too - I can see some spreadsheet tinkering being in order.

Croeso69

Notepad_Phil said:

DairyQueen said:

It may be worth Mr DQ deferring his SP. The possibility of doing so has now increased. Depends on inflation, the real value of the deferral premium going forward and investment growth.

That's a really good thought - we were considering delaying SP for Mrs Notepad given that I reckon she has a very good chance of making it to her nineties, but I can see that there might now be circumstances where it could be for me too - I can see some spreadsheet tinkering being in order.

Are you Spreadsheet Phil now?

Notepad_Phil

Croeso69 said:

Notepad_Phil said:

DairyQueen said:

It may be worth Mr DQ deferring his SP. The possibility of doing so has now increased. Depends on inflation, the real value of the deferral premium going forward and investment growth.

That's a really good thought - we were considering delaying SP for Mrs Notepad given that I reckon she has a very good chance of making it to her nineties, but I can see that there might now be circumstances where it could be for me too - I can see some spreadsheet tinkering being in order.

Are you Spreadsheet Phil now?

Well there are some things that a notepad just can't do...

Mick70

No . There maybe other tax decisions in the pipeline that are introduced over the next year or two , plenty speculate as is natural , but nobody knows