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

Universidad

Qyburn said:

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)?

There are plenty of fairly ordinary people who would  be in a position to exceed the annual allowance at least some of the time. (The carry forward rule gives a lot of flexibility here).

48,000 is well above the median wage. But it's just over the 75th percentile for people in their late 40s/early 50s. So just under 1 in 4 people will be in that bracket.

How many homes are dual income? About 1/3rd of homes have 2 people in full time work.

How many folks pay off their mortgage before they retire? About 5 in 6. It's very common.

What about inheritance? Well basically half of people inherit something. The median inheritance for people in the last 10 year stretch to retirement age is about the same as the median salary - around 33,000.

Remember, not all of the above possibilities above have to obtain before one can exceed the annual allowance. It may not be a majority of people, but it is a significant number of fairly ordinary, if middle class, people!

I wouldn't describe these people as "well off", but perhaps it's part of the definition of well off that if you inherit 33,000 then you are well off, even if you weren't before.

The question about how many people would put "spare" money into their pension is more on the nose. But I don't think we should disincentivise investment choices because they're unpopular.

Albermarle

Universidad said:

Qyburn said:

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)?

There are plenty of fairly ordinary people who would  be in a position to exceed the annual allowance at least some of the time. (The carry forward rule gives a lot of flexibility here).

48,000 is well above the median wage. But it's just over the 75th percentile for people in their late 40s/early 50s. So just under 1 in 4 people will be in that bracket.

How many homes are dual income? About 1/3rd of homes have 2 people in full time work.

How many folks pay off their mortgage before they retire? About 5 in 6. It's very common.

What about inheritance? Well basically half of people inherit something. The median inheritance for people in the last 10 year stretch to retirement age is about the same as the median salary - around 33,000.

Remember, not all of the above possibilities above have to obtain before one can exceed the annual allowance. It may not be a majority of people, but it is a significant number of fairly ordinary, if middle class, people!

I wouldn't describe these people as "well off", but perhaps it's part of the definition of well off that if you inherit 33,000 then you are well off, even if you weren't before.

The question about how many people would put "spare" money into their pension is more on the nose. But I don't think we should disincentivise investment choices because they're unpopular.

To be fair to the poster posing the question, it is true that although many people not on particularly large salaries can sometimes reach the AA ( as you have explained well above) . I would guess that most people adding £40K and now maybe £50K?  are more likely to be in the £70K + salary area, which is Top 10% sector. Clearly people earning more or with dual high  income household, will be better able still to exploit a bigger AA.

Qyburn

It seems we won't agree on what "well off" means.  For me I guess it means somewhere in the top quarter or maybe higher, which would put us into that category.

Maybe for you it's only the top 10% or 1% who you consider well off.

So maybe back to my original comment, increasing AA will only benefit much less than 1/2 the working population, and it will be the "better off" fraction.

vacheron

Universidad said:

Qyburn said:

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)?

There are plenty of fairly ordinary people who would  be in a position to exceed the annual allowance at least some of the time. (The carry forward rule gives a lot of flexibility here).

48,000 is well above the median wage. But it's just over the 75th percentile for people in their late 40s/early 50s. So just under 1 in 4 people will be in that bracket.

How many homes are dual income? About 1/3rd of homes have 2 people in full time work.

How many folks pay off their mortgage before they retire? About 5 in 6. It's very common.

What about inheritance? Well basically half of people inherit something. The median inheritance for people in the last 10 year stretch to retirement age is about the same as the median salary - around 33,000.

Remember, not all of the above possibilities above have to obtain before one can exceed the annual allowance. It may not be a majority of people, but it is a significant number of fairly ordinary, if middle class, people!

I wouldn't describe these people as "well off", but perhaps it's part of the definition of well off that if you inherit 33,000 then you are well off, even if you weren't before.

The question about how many people would put "spare" money into their pension is more on the nose. But I don't think we should disincentivise investment choices because they're unpopular.

I would consider myself one of these fairly ordinary people and have had my pension set up to to contribute just under the AA for the last few years. 

The explaination for my situation is:

• My mortgage is paid off (well technically fully offset) meaning we don't need to account for the  £1000+ per month which many people with similar incomes need to.
• Thanks to the arrangement of my salary sacrifice pension I am only contributing £1480 per month from my actual take home pay to achieve contrubutions of just under the AA.
• My wife works part time so brings in some extra money, but her scheme isn't as efficient so we focus any additional contributions towards mine and use her income for savings and other household spending.
• We have always lived within our means so have always had some money left at the end of the month anyway.
• I have just 7 years left (possibly 8 after Wednesdays budget ) before I can draw down my pension, so I am not locking the money away for decades.

michaels

I earn 38k working 4 days a week, reduced to that level due to the AA.

Next year I was looking at reducing to 3 days or stop working in London but would not need to if the AA were increased.

Delaying sra to 68/pension availability date from 55 to 58 for those in their early 50s would seriously pee me off.  Less than 2 years warning of a major impact pension change seems a little short notice

zagfles

Qyburn said:

It seems we won't agree on what "well off" means.  For me I guess it means somewhere in the top quarter or maybe higher, which would put us into that category.

Maybe for you it's only the top 10% or 1% who you consider well off.

So maybe back to my original comment, increasing AA will only benefit much less than 1/2 the working population, and it will be the "better off" fraction.

Well clearly. But the objective is to discourage early retirement in jobs that society needs, like NHS doctors.

Although I'm not sure AA increase will have much effect, LTA increase probably more so.

michaels

Oh yes the personal allowance withdrawal could be fixed by removing it and also brining the 45% threshold down to 80k. People earning between 80 and 100k would be up to 1k worse off but the system would be fixed.

zagfles

michaels said:

Oh yes the personal allowance withdrawal could be fixed by removing it and also brining the 45% threshold down to 80k. People earning between 80 and 100k would be up to 1k worse off but the system would be fixed.

But anyone earning £107k+ would be better off. Imagine the headlines in the Guardian!

ex-pat_scot

RogerPensionGuy said:

I agree the LTA certainly isn't the only pension rule or value that needs adjustments soon to put pension rules/values/figures back to a normal reasonable place espically considering inflation and market volatility.

They also need to stop tinkering all the time as prudent or even casual planning is just best guessing these last 12 years, they need to make sensible changes and give stability. 

If they need to change in the future, any downwards shifts that will affect people need long lead times with various protections for people to avoid be disadvantaged. 

For me personally unless the LTA is increased I will indeed stop paid employment this summer as personally my time, pay and pensions just don't add up for me and I'm in an industry that's absolutely desperate for people and especially with good experience. 

Time will tell what they do.

Me too - when caught in the crosshairs of LTA, 62% marginal tax band, and AA ceiling, then financially it's a chump's game to carry on.
And there's the risk that the rules change suddenly - if I carry on, then might I lose out if rules change?

I too work in an area with huge demand at the moment (you can't magically increase the pool of people with 25+years of experience). I am indeed well paid. And taxed.

michaels

zagfles said:

michaels said:

Oh yes the personal allowance withdrawal could be fixed by removing it and also brining the 45% threshold down to 80k. People earning between 80 and 100k would be up to 1k worse off but the system would be fixed.

But anyone earning £107k+ would be better off. Imagine the headlines in the Guardian!

Imagine how much neater the marginal tax rate curve would look though....