Ooh, Time to Start Speculating About LTA Changes Again

NedS

SouthCoastBoy said:

Flugelhorn said:

SouthCoastBoy said:

saucer said:

dunstonh said:

Despite the LTA causing issues in the NHS, Labour would have a field day if it was increased.   And the twitterati would dominate the media with their lack of understanding about the issues.  So, its easier for the Government to leave it unchanged.

That LTA issue for senior clinicians in the NHS is a significant issue though.  We have a situation now where some of the doctors are leaving permanent NHS employment to retire, or worse enjoy very high agency rates, sometimes eye wateringly high (albeit this is a minority who do this).  LTA is effectively leading people to choose between working for very little benefit or alternatively retiring early.  

When you say working for very little benefit, aren't they still getting paid? My understanding of lta is if exceeded you pay the tax rebate back, is that correct? If so surely there is still a benefit just not as lucrative as before?

the main problem this year  is actually the AA rather than the LTA - huge unavoidable charges which in some cases are exceeding the years earnings 

I assume they could opt out of contributing anymore to the pension , once they hit 40k for the year,to avoid the aa charges?

There are two issues - firstly the inflation rate isn't known until October, 7 months into the tax year. Secondly for people with large CARE scheme benefits, high inflation alone can cause them to massively exceed the AA irrespective of any contributions in the current year, so they can still face a large tax bill based solely on the scheme's standard contributions (which they cannot reduce or change without opting out of the scheme completely).

SouthCoastBoy

I think this discussion illustrates the massive differences between public and private sector pensions, I earn 100k+ in the private sector and have no such issues, as public sector pensions become more of a liability for the govt maybe they need to be reformed and cheaper for all tax payers.

LHW99

NedS said:

SouthCoastBoy said:

Flugelhorn said:

SouthCoastBoy said:

saucer said:

dunstonh said:

Despite the LTA causing issues in the NHS, Labour would have a field day if it was increased.   And the twitterati would dominate the media with their lack of understanding about the issues.  So, its easier for the Government to leave it unchanged.

That LTA issue for senior clinicians in the NHS is a significant issue though.  We have a situation now where some of the doctors are leaving permanent NHS employment to retire, or worse enjoy very high agency rates, sometimes eye wateringly high (albeit this is a minority who do this).  LTA is effectively leading people to choose between working for very little benefit or alternatively retiring early.  

When you say working for very little benefit, aren't they still getting paid? My understanding of lta is if exceeded you pay the tax rebate back, is that correct? If so surely there is still a benefit just not as lucrative as before?

the main problem this year  is actually the AA rather than the LTA - huge unavoidable charges which in some cases are exceeding the years earnings 

I assume they could opt out of contributing anymore to the pension , once they hit 40k for the year,to avoid the aa charges?

There are two issues - firstly the inflation rate isn't known until October, 7 months into the tax year. Secondly for people with large CARE scheme benefits, high inflation alone can cause them to massively exceed the AA irrespective of any contributions in the current year, so they can still face a large tax bill based solely on the scheme's standard contributions (which they cannot reduce or change without opting out of the scheme completely).

And it is almost impossible for those in the scheme to get a sensible answer from the "powers that be" in relation to their pension input amount, so understanding whether they need to put by a significant extra tax amount / opt out isn't easy.

Flugelhorn

LHW99 said:

And it is almost impossible for those in the scheme to get a sensible answer from the "powers that be" in relation to their pension input amount, so understanding whether they need to put by a significant extra tax amount / opt out isn't easy.

Yes that is a problem - when I came to retire it took ages for them to produce an accurate statement - in the end I had to guess how much pension I was going to get and then wait to see several months to find out what it actually was

Flugelhorn

SouthCoastBoy said:

I think this discussion illustrates the massive differences between public and private sector pensions, I earn 100k+ in the private sector and have no such issues, as public sector pensions become more of a liability for the govt maybe they need to be reformed and cheaper for all tax payers.

So long as they keep paying mine -of course if they reduce mine much they won't get as  much tax off me 

Albermarle

My understanding of lta is if exceeded you pay the tax rebate back, is that correct? If so surely there is still a benefit just not as lucrative as before?

This only really applies if you get 40% tax relief when contributing and pay 20% tax in retirement. If you are a 40% taxpayer in retirement, then you have to give back more than you gained in tax relief. 55% as opposed to gaining 40%.

Pat38493

Albermarle said:

My understanding of lta is if exceeded you pay the tax rebate back, is that correct? If so surely there is still a benefit just not as lucrative as before?

This only really applies if you get 40% tax relief when contributing and pay 20% tax in retirement. If you are a 40% taxpayer in retirement, then you have to give back more than you gained in tax relief. 55% as opposed to gaining 40%.

Are you here only talking about DB schemes?  With DC scheme it wouldn't be quite that clear cut would it?  If you keep that gained tax invested long enough to make > 15% return, you would still gain at least some amount in the end, plus there might be advantages in terms of inheritance.  Also you would automatically see the benefit of any future LTA increase if it ever happened.

DoublePolaroid

LHW99 said:

And it is almost impossible for those in the scheme to get a sensible answer from the "powers that be" in relation to their pension input amount, so understanding whether they need to put by a significant extra tax amount / opt out isn't easy.

Having considered this at great length recently, I can say that opting out is a poor option for the loss of death in service benefits alone. Then there’s the matter of missing out on a chunk of annual pension. 

It is worth pointing out for anybody who reads this to whom it’s relevant and who may not be aware, it’s possible to take out a loan from the pension scheme to pay HMRC at the cost of reducing your annual pension at retirement, with an an interest charge of 2.4%. This will be especially important for many in the scheme to consider for the current pension period year due to the aforementioned affects of inflation meaning many of those affected will not easily be able to pay out of their pockets. 

Flugelhorn

@DoublePolaroid I think the interest rate might be CPI + 2.4% 

DoublePolaroid

Flugelhorn said:

@DoublePolaroid I think the interest rate might be CPI + 2.4% 

You are of course correct, I omitted it for simplicity, because since the pension itself grows by CPI and the charge is taken off the final pension the effect cancels out. I welcome a correction in case I’m making a logical error.