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

Universidad

Qyburn said:

Do you actually mean Annual Allowance, rather than Lifetime Allowance? I don't really understand why ithe AA is a disincentive to work.

I can't speak to anyone elses experience, but I am solely in my role now because of the pension. I left a job over cuts to a pension scheme, when I realised how difficult it would be to retire if I stayed in the sector.

I'm playing a desperate game of catch up, now, trying to get my pension back to where I thought it was.

If it weren't for carry forward, I'm not sure I would want to work full time, either. I'm putting a significant amount of my salary into added pension.

I don't love working long hours, but I am willing to sacrifice a big portion of my life in the short term to buy myself a comfortable retirement.

I'm looking forward to having enough DB annual pension that I can stop worrying about the future and just start living for today.

That will involve going part time, almost without question. If there was a hard limit of 2500 annual pension accrual in my current DB scheme, I wouldn't want to work a second longer than I had to.

Fortunately my old scheme was sufficiently naff by the end that I have LOADS of carry forward.

Gary1984

A £60k AA plus carry back would perhaps mean I could get under £100k every second year and avoid the 62% rate by alternatively putting in zero then £120k. Of course the issue is that these rules are in constant flux so there's no guarantee they won't scrap carry back by the time I get to use it and I'd have wasted a year of AA.

Dazed_and_C0nfused

Gary1984 said:

A £60k AA plus carry back would perhaps mean I could get under £100k every second year and avoid the 62% rate by alternatively putting in zero then £120k. Of course the issue is that these rules are in constant flux so there's no guarantee they won't scrap carry back by the time I get to use it and I'd have wasted a year of AA.

I can't imagine carry back will be reintroduced.

But you never know!

NedS

Qyburn said:

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?

I'll admit I may be a bit of a corner case, but I earn £28k as a civil servant (below national average), and my AA amount for this year is £48k, so well above the £40k Annual Allowance, having made extra pension contributions to buy added pension this year.

DoublePolaroid

Malthusian said:

Nebulous2 said:

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.

That's the "nurses are using food banks" story in a white coat.
There are big problems with the Annual Allowance and how it affects DB schemes, but the NHS Pension Scheme allows the tax to be paid out of your pension fund. (Subject to conditions.) If someone has had to re-mortgage their house in order to pay an AA charge personally, it suggests they buried their head in the sand, and then buried the sand.

Whilst I’d also take the “doctors remortgaging homes to pay AA charge” thing with a pinch of salt, a rational doctor of a money saving bent landed with a tax charge of five figures and without the cash at hand to pay would have, up until a year ago, been better off remortgaging at, say 1.5% than paying the interest on what is effectively a loan from the NHS scheme to pay the charge, with that rate varying between CPI + 2.4%, 2.8% or 3% depending on exactly when the scheme pays election was made. 

Of course the doctor could take a gamble on scheme pays anyway and hope not to pay the loan back off in full, but that would come at the not insignificant cost of requiring their own death to occur before or shortly after drawing the pension. Which, despite offering a big W against HMRC, would otherwise be a bit of a bummer. 

RogerPensionGuy

Press releases now appearing more confident of sensible increase to various pension rules,, hopefully it will include some mechanism for people unfairly caught out by random down shifting of the LTA to get their pension pots and plans back in order.

If these changes are indeed correct, it will certainly increase people happier to remain or going back in to the working/employment arena. 


https://www.independent.co.uk/money/hunt-considering-pension-changes-in-the-budget-in-drive-to-bolster-workforce-b2300178.html

marlot

RogerPensionGuy said:

Press releases now appearing more confident of sensible increase to various pension rules,, hopefully it will include some mechanism for people unfairly caught out by random down shifting of the LTA to get their pension pots and plans back in order.

If these changes are indeed correct, it will certainly increase people happier to remain or going back in to the working/employment arena. 


https://www.independent.co.uk/money/hunt-considering-pension-changes-in-the-budget-in-drive-to-bolster-workforce-b2300178.html

I doubt any change will help anyone who retired at 100% of the current LTA (£1.073M).  Even if the LTA rises to £1.5M, they'll likely be trapped by the old level.  Hard to see an easy way to entice them back into work. 

A big increase in LTA and AA may well reduce pressure on medics.  Because the 2015 NHS scheme raises pensions by CPI+1.5% each year, the AA bills can be huge.

Pat38493

BBC are running their main headline this morning on Today program R4 with the 60K figure and also quoting a 1.8m figure for LTA.

peterg1965

Pat38493 said:

BBC are running their main headline this morning on Today program R4 with the 60K figure and also quoting a 1.8m figure for LTA.

I would be delighted if this were to happen tomorrow. Not so much the AA, but more the LTA.  I have 11% of LTA remaining to use which would correspond to a further £80K of headroom left for me, which i will use.  I would have gone over the LTA in the next year, so could add an extra £20k to my retirement funds.

vacheron

peterg1965 said:

Pat38493 said:

BBC are running their main headline this morning on Today program R4 with the 60K figure and also quoting a 1.8m figure for LTA.

I would be delighted if this were to happen tomorrow. Not so much the AA, but more the LTA.  I have 11% of LTA remaining to use which would correspond to a further £80K of headroom left for me, which i will use.  I would have gone over the LTA in the next year, so could add an extra £20k to my retirement funds.

This raised an interesting thought in my head:

Assuming if the LTA is raised, which appears to be increasingly likely from recent reporting:

Will anyone who was approaching the LTA and who had significantly dialed down their contributions over last three years because of this be allowed to carry forward all the previous three years of unused AA, or do you think the plans may limit any carry forward to not exceeding the LTA that was in place at the time?