Budget 15th March2023, any pension changes predictions or views?

zagfles

hugheskevi said:

NedS said:

westv said:

Workerdrone said:

HeyYeah said:

The rumors I've read in the press (Guardian and FT) are:

1. Inc LTA & Annual allowance
2. Inc retirement age to 68 for everyone who is 54 or younger

I'm hoping for #1, although I'm not quite at the LTA and probably won't hit it given the age I wish to retire, it would simplify my planning/spreadsheets not to have to take it into account. Also I'll put more in my pension and less in my ISA, I would be affected by #2 as I'm at the top end of that banding, so would have to work for longer.

You had me worried there for a moment on point 2, until I read the article and realised it only applied to SPA. Ive never bothered to include SPA in my workings as I plan to go at 60. If its still there for me at 68, I'll just reduce my drawdown accordingly

It would affect thousands who are in the CS Alpha pension though.

Or any other DB scheme where NRA is linked to SPA

It will be interesting to see the justification for the increase should it occur, as I do not believe that data on longevity would support an increase from everything I have seen on longevity days analysis over the last few years 

More likely is that govt would change it's belief that 32% of adult life should be spent in retirement to whatever figure is needed to support a change to age 68. The 32% figure has already been changed from an original 33.3% figure.

That would in turn mean that public service pension age is not linked to changing longevity, but to changing govt beliefs about appropriate retirement age.

I never understood why NPA in public service pension schemes couldn't just be linked to an actuarially calculated Longevity Adjustment Factor as used by several private sector pension schemes, instead of the much more subjective and politically determined State Pension age.

They might decide to use the money saved in pension costs to increase the pay offers in the various pay disputes in the public sector. If they're going to make the unions a politically determined offer higher than those recommended objectively by the independant pay review bodies, then why shouldn't they do the same with the NPA of the pension schemes. 

HHarry

Workerdrone said:

HeyYeah said:

The rumors I've read in the press (Guardian and FT) are:

1. Inc LTA & Annual allowance
2. Inc retirement age to 68 for everyone who is 54 or younger

I'm hoping for #1, although I'm not quite at the LTA and probably won't hit it given the age I wish to retire, it would simplify my planning/spreadsheets not to have to take it into account. Also I'll put more in my pension and less in my ISA, I would be affected by #2 as I'm at the top end of that banding, so would have to work for longer.

You had me worried there for a moment on point 2, until I read the article and realised it only applied to SPA. Ive never bothered to include SPA in my workings as I plan to go at 60. If its still there for me at 68, I'll just reduce my drawdown accordingly

Unless acess to personal pensions is linked to 10yrs prior to SPA.

That could leave a load of people who expected to be able to access their pot at 55, suddenly having to wait an extra 3 years.

Expotter

HHarry said:

Workerdrone said:

HeyYeah said:

The rumors I've read in the press (Guardian and FT) are:

1. Inc LTA & Annual allowance
2. Inc retirement age to 68 for everyone who is 54 or younger

I'm hoping for #1, although I'm not quite at the LTA and probably won't hit it given the age I wish to retire, it would simplify my planning/spreadsheets not to have to take it into account. Also I'll put more in my pension and less in my ISA, I would be affected by #2 as I'm at the top end of that banding, so would have to work for longer.

You had me worried there for a moment on point 2, until I read the article and realised it only applied to SPA. Ive never bothered to include SPA in my workings as I plan to go at 60. If its still there for me at 68, I'll just reduce my drawdown accordingly

Unless acess to personal pensions is linked to 10yrs prior to SPA.

That could leave a load of people who expected to be able to access their pot at 55, suddenly having to wait an extra 3 years.

And that's probably one the reasons for doing it, they want people to stay in work for longer.

Filo25

As another one impacted by the 62% effective tax plus NI rate, I will be either retiring or going part time as soon as I hit the LTA.

Not worth the stress quite honestly to be largely working for the benefit of the state.

Universidad

hugheskevi said:

It will be interesting to see the justification for the increase should it occur, as I do not believe that data on longevity would support an increase from everything I have seen on longevity days analysis over the last few years

If the data would show an increase in longevity, I'm sure they would use that justification. But I suspect the real justifications are the ones they can't give - it saves the public purse money, and keeps people in the workforce.

So I would expect for them to:

a) give the justification that longevity has continued to increase - even if that is not true. (What are you going to do if it's a lie? Argue on the internet? Set up a petition for them to ignore in parliament?) or

b) give the justification that longevity is expected to continue to increase, or would have continued to increase, were it not for covid, and they need to plan for the long term, or

c) pivot the justifcation for pension age from "life expectency", to "proportion of the population in retirement", and support that with arguments about the proportion of public service spend and/or fiscal balance.

Nebulous2

Qyburn said:

Unless I miss something the Annual Allowance, at least as it affects DC pensions, can only be a limit for the really well off.  Those who year after year have more than £40,000 spare earnings that they know they won't need to access until they reach pension age.

I believe there are other factors with DB pensions, something like including the increase in accrued benefits.  I don't really understand that but it sounds almost as if it was equivalent to including increased value of DC pension investments as well as actual contributions.  If there's some anomaly meaning that the AA affects low paid employees with DB pensions, then maybe it would be better to fix that rather than lifting the limit to benefit mainly top earners.

I've never chased the detail as it doesn't affect me, and it may have been clickbait, but I've certainly seen articles claiming that Doctors have had to remortgage their homes to pay the tax due.

With a final salary element, having a big increase, such as becoming a consultant could play havoc with the annual allowance. 

billy2shots

Regarding means testing state pension. 

I know the political parties can't agree on what day of the week it is, let alone tax planning but....


It does seem a bit of a no brainer. Come together and announce a cross party decision. That way the 'vote loser ' is all parties not just the one pulling the rug. 

Riots in the street are another topic. 

Universidad

billy2shots said:

It does seem a bit of a no brainer. Come together and announce a cross party decision. That way the 'vote loser ' is all parties not just the one pulling the rug.

I don't think it's that simple. If Labour do a deal with the Tories to reduce working peoples retirement income, a lot of people will stop voting Labour.

zagfles

billy2shots said:

Regarding means testing state pension. 

I know the political parties can't agree on what day of the week it is, let alone tax planning but....


It does seem a bit of a no brainer. Come together and announce a cross party decision. That way the 'vote loser ' is all parties not just the one pulling the rug. 

Riots in the street are another topic. 

They're trying to stop people retiring early. If they say to people "if you have a decent private pension you won't get a state pension" that'll destroy the incentives for pension saving. Personally I'd retire immediately and drawdown my entire DC pot before SPA 

Besides, even if something so stupid and unpopular was agreed between the 2 main parties, that doesn't mean it'll happen. A new party or an existing fringe party would rise in popularity eg the Lib Dems, Reform UK or a completely new party. As happened in France, Macron's party En Marche was only founded in 2016 and it dominated French politics within a year, winning the 2017 presidential and parliamentary elections.

Qyburn

Universidad said:

Different people will have different definitions for "well off"

Agreed, I was thinking in terms of being a relative minority, towards the top of the scale, rather than a specific threshold.

Universidad said:

Let's say your salary is 48000, and your employer pays 17.45% to your 3% into a workplace DC scheme. You're already 1/4 of the way there.

Your pre-tax salary is 4000. Now, if you put 2500 per month into a SIPP, you will breach the annual allowance. Difficult for most people to do - put 2500 of 4000 into a pension.

But if you're a double income family, the kids have just finished Uni, you've inherited a pot of money, or finished paying off your mortgage early and are just now realising you're not well prepared enough for retirement...

That would certainly fall within my definition. Not specifically the salary (although that's nearly 50% above median so in itself puts them in a minority) but the other suppositions of double income, inherited wealth and other unspecified factors meaning they can live off £1,500 a month pre-tax while locking the rest away until at least pension age.

To put this in context, what percentage of the working population would be able to make use of an increased AA (consider DC pensions only)?  And what percentage actually would?