What do MSE'ers do when LTA (nearly) reached

jim8888

leosayer said:

The 55% tax rate only applies to lump sum withdrawals. Most people will take amounts above the LTA as (taxable) income and pay a 25% charge. 

Many thanks for that reminder! I'd either completely forgotten about that or had overlooked it. I've recently calculated I'm over the LTA and was beginning to panic that all my later regular withdrawals would be taxed at 55%. 
Anyway, I'm hoping the government are going to scrap the LTA in an effort to stop doctors and other high earners retiring in their fifties. 

NedS

EdSwippet said:

leosayer said:

I can't imagine a scenario where I would de-risk my savings purely to avoid 25% tax on the gains. 75% of something is better than 100% of nothing. ...

Also, stating "better than 100% of nothing" presents this as a false dichotomy. I don't think anyone suggested entirely "de-risking" (even moving to all gilts is not zero-risk!).  Lowering risk means accepting the potential for lower return, but it does not create zero return, which is what your wording implies. And lowering risk in a pension but raising it in ISAs is neither "de-risking" nor lowering risk overall.

Exactly, all investing is about risk. The OPs statement also fails to acknowledge there could be a loss. When making any investment decision, we weigh the risks versus the rewards and make decisions based upon our circumstances. Here, the upside has an additional tax burden which we must weigh when deciding if the potential for (higher taxed) rewards are worth the risks we are taking. It can reach a point where the additional tax burden may be so high that it is simply not worth taking the risk as the potential rewards diminish but the losses remain high, shifting the balance. Combine this with the fact that many who have ~£1million in pension assets may not need to take any risk, and we can understand why there may be less appetite to exceed the LTA.

Albermarle

Although it is not an exact science. In 2022, my more aggressively invested ISA went down more than my less risky SIPP. So the opposite of what was intended.....

NedS

Albermarle said:

Although it is not an exact science. In 2022, my more aggressively invested ISA went down more than my less risky SIPP. So the opposite of what was intended.....

Surely that is exactly what was intended? You want the less risky investments to fall less in a downturn?