IFS reccomendations - £100 k max lump sum tax free from pension

NoMore

The important thing @youngsaver20 is to base your retirement savings on the current rules. Don’t change because some bollox think tank has produced a report on suggestions to change pensions. As has been pointed out no political party is talking about any of this as a possibility. 

This is the problem with think tank suggestions like this and then the subsequent reporting, people already don’t trust pensions because they are worried about rule changes and then things like this just add to the distrust. 

Albermarle

NoMore said:

The important thing @youngsaver20 is to base your retirement savings on the current rules. Don’t change because some bollox think tank has produced a report on suggestions to change pensions. As has been pointed out no political party is talking about any of this as a possibility. 

This is the problem with think tank suggestions like this and then the subsequent reporting, people already don’t trust pensions because they are worried about rule changes and then things like this just add to the distrust. 

However there does seem to be increased rumblings about the generosity of the tax system surrounding pensions, especially for higher earners/those with large pots. It used to be always higher rate tax relief that was highlighted, but now seems to be more aspects seeing the light of day.

On the other hand as you say, we can only base our decisions on the current rules.

Pat38493

I believe that a lot of the proposals discussed and proposed here require primary legislation in the HOC and HOL.

The current government don't even have control of their own party, let alone any others, to be getting through primary legislation on topics like this that can be easily (mis?)characterised by their opponents.

As such, I suspect they will mainly be looking to pull levers that they can pull with single votes in HOC like changing rates, allowances, limits etc.

Nothing like these big changes to the system could be done quickly - it would take months or years to get the legislation changes right and then there would have to be a transition period.

EdSwippet

Pat38493 said:

As such, I suspect they will mainly be looking to pull levers that they can pull with single votes in HOC like changing rates, allowances, limits etc.

Probably. Raise tax rates, lower tax allowances, and so on. Just a continuation of what they've been up to over the past decade or so.

Pat38493 said:

Nothing like these big changes to the system could be done quickly - it would take months or years to get the legislation changes right and then there would have to be a transition period.

Doing it "right" won't even feature as a bullet point on the government's plan (which, by the way, will be some variation on the underpants gnomes).

EdSwippet

There is a new article out today, in which Paul Johnson of the IFS weasels his way around the nonsense the IFS put out last week:

Changes to taxing pensions need to be sensitive, but they should happen - IFS

Apparently, his answer to the problem of pensions being "unfair, complex, and distortionary" is the make them more unfair, more complex, and arguably retroactively more distortionary for decades to come.

Workerdrone

EdSwippet said:

There is a new article out today, in which Paul Johnson of the IFS weasels his way around the nonsense the IFS put out last week:

Changes to taxing pensions need to be sensitive, but they should happen - IFS

Apparently, his answer to the problem of pensions being "unfair, complex, and distortionary" is the make them more unfair, more complex, and arguably retroactively more distortionary for decades to come.

Just read that. His phrase "bake in injustice"  sums up the whole article for me. Life is unjust which is why I bear more of a resemblance to a potato than to Brad Pitt. But what isn't unjust to me is that everyone should have the freedom to plan for something long term like a pension without the government constantly moving the goal posts. Desiring equality of opportunity = good, desiring equality of outcome = bad.

YoungSaver20

I wonder if we will hear anything concrete during the review on pensions in May - most likely just confirmation of rise to age 68…but in which year is the question.

Albermarle

It is difficult to disagree with the general thrust that pension rules are generous, particularly for higher earners and particularly the sheltering from IHT and beneficiary pensions. ( although clearly any changes will be messy and complicated) 
However I do not really understand the problem with the 25% tax free. The majority of pension savers will be gaining 20% tax relief, and if they have to pay 20% on the way out then there is no tax gain at all. The often quoted 6.25% tax benefit is solely due to 25% being tax free on withdrawal.
Also he mentions a bigger benefit for 40% taxpayers in retirement, which is true, but AFAIK only a small % of people pay 40% tax in retirement. Most people taking a large 25% tax free sum, will still be 20% taxpayers ( although could well have gained from 40% tax relief on the way in, which is of course another story)
Although there is little we can do about it, I think we are slowly being softened up for future changes.
Might as well go out and get spending it !

michaels

As a govt in desperate need of revenue now, any changes that reduced pension contributions (that reduce taxation a bit and deffer it a lot) would be a win.  Plus we are generally talking about people who will never qualify for means tested benefits in retirement so there is little 'cost' to their having smaller pots in the future.

artyboy

michaels said:

As a govt in desperate need of revenue now, any changes that reduced pension contributions (that reduce taxation a bit and deffer it a lot) would be a win.  Plus we are generally talking about people who will never qualify for means tested benefits in retirement so there is little 'cost' to their having smaller pots in the future.

We are also talking about people whose financial position means that they are 90% plus solid Tory voters, and already may well be feeling squeezed with the lowering of CGT thresholds, and the 45% tax band.

So I suppose it comes down to how many votes these turkeys think they can safely cast for Christmas... may be moot in a couple of years time when they're out of office, although don't expect a hard socialist government to fill the void!