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

Retired_Minky

According to the FT the money purchase allowance is also going up to £10k

aldershot

westv said:

I doubt either of these will tempt many early retirees back to work.

No, but it might stop the flow out and fixes the problem in the NHS was is acute. It’s going to make poor headlines but something had to be done. 

ex-pat_scot

I guess they are heading in the direction of "restoring levels to 10 years ago" and "still lower than when Labour was last in power".

You can't really change AA and not LTA - AA (particularly the 16X calc for deemed input) for DB pension is very tricky to navigate.
Similarly, trying to predict for DC what the future investment returns will be, and future tinkering to LTA limits, are really uncertain.

Neither are ideal, but having headroom is going to be very helpful

It's the first time in a decade that the speculation and kite-flying seems to be certain on what tomorrow's outcome will be.

Selfishly, also for the first time since Brown was chancellor, this would actually be a budget that results in a benefit for me.
Usually I'm in the "suck it up, with the world's smallest violin" target on my back.

I already contribute the max AA of £40,000 for many years, and have no c/f
I'm about 10% off the LTA, so expect to hit the £1.07m some time later next year, if investments plod forward.
At that point, and having hit 55, I could see little rational point in continuing.
Even with the full AA going into my pot, I still edge into the 62% marginal band.

Now- obviously depending on tomorrow's announcement - I'll have to take a fundamental rethink of my plans.
I expect that Mr Hunt will have the desired impact on me - probably delay my "retirement" by a couple of years.
Has it cost him though?
I'll get the benefit of a lower lifetime tax rate on that extra 2 years of income (I'll probably pay about £8000 tax on each £40,000 annual pension contribution when I crystallise it, depending on whatever marginal rate is in play at the time). 
BUT he'll have two additional years of my salary and tax, so an additional £45,000 in tax and NI for each year).
So the net result will be that this "tax break" results in me generating £35,000 to £40,000 additional tax each year, which is a win overall I think.

Of course I will have to plough on for another couple of years though.

One further thing, that hasn't been mentioned recently, would be to extend the 45% rate down to £100,000 and stop the withdrawal of personal allowance. I'm sure that could be made cost - neutral, and remove the ridiculous marginal rate. It would then mean that we aren't trying to dance around limits with pension contributions, reduction in hours etc. (yes I know other marginal rates are similarly ridiculous, but I don't see why this one can't be ironed out with a cost-neutral approach)

JoeCrystal

Retired_Minky said:

According to the FT the money purchase allowance is also going up to £10k

That is interesting; I wonder if they will bump up the Tax relief limit on member contributions as well, which is, at the moment, is limited to relief on contributions up to the higher of: 100% of your UK taxable earnings or £3,600. If they increase from £3,600  to £10k, I will be pretty miffed about that!

Other than that, I doubt this budget will benefit me apart from very minor changes in take-home pay if any.

michaels

ex-pat_scot said:

I guess they are heading in the direction of "restoring levels to 10 years ago" and "still lower than when Labour was last in power".

You can't really change AA and not LTA - AA (particularly the 16X calc for deemed input) for DB pension is very tricky to navigate.
Similarly, trying to predict for DC what the future investment returns will be, and future tinkering to LTA limits, are really uncertain.

Neither are ideal, but having headroom is going to be very helpful

It's the first time in a decade that the speculation and kite-flying seems to be certain on what tomorrow's outcome will be.

Selfishly, also for the first time since Brown was chancellor, this would actually be a budget that results in a benefit for me.
Usually I'm in the "suck it up, with the world's smallest violin" target on my back.

I already contribute the max AA of £40,000 for many years, and have no c/f
I'm about 10% off the LTA, so expect to hit the £1.07m some time later next year, if investments plod forward.
At that point, and having hit 55, I could see little rational point in continuing.
Even with the full AA going into my pot, I still edge into the 62% marginal band.

Now- obviously depending on tomorrow's announcement - I'll have to take a fundamental rethink of my plans.
I expect that Mr Hunt will have the desired impact on me - probably delay my "retirement" by a couple of years.
Has it cost him though?
I'll get the benefit of a lower lifetime tax rate on that extra 2 years of income (I'll probably pay about £8000 tax on each £40,000 annual pension contribution when I crystallise it, depending on whatever marginal rate is in play at the time). 
BUT he'll have two additional years of my salary and tax, so an additional £45,000 in tax and NI for each year).
So the net result will be that this "tax break" results in me generating £35,000 to £40,000 additional tax each year, which is a win overall I think.

Of course I will have to plough on for another couple of years though.

One further thing, that hasn't been mentioned recently, would be to extend the 45% rate down to £100,000 and stop the withdrawal of personal allowance. I'm sure that could be made cost - neutral, and remove the ridiculous marginal rate. It would then mean that we aren't trying to dance around limits with pension contributions, reduction in hours etc. (yes I know other marginal rates are similarly ridiculous, but I don't see why this one can't be ironed out with a cost-neutral approach)

I thought the 45% rate would need to come down to 80k for it to be tax neutral but it definitely makes sense to me.

I wonder if the AA isn't to keep more people in work but to keep those who are working to work more hours - perhaps 4 days a week rather than 3 etc?

MK62

If the LTA is raised to £1.8M, I wonder if the max tax free cash will rise with it to £450k (currently it's 25% of the LTA, c268k).

 

If so, someone who retired last year with a £1.8M pot would be pretty miffed if there's no backdating........but the rest of the country might be pretty miffed if the chancellor spends what little he has on this kind of tax giveaway......

The optics might well be in the realms of (to borrow a recent phrase) "God, this is awful"..........it's not so much whether it's right or wrong to do this, it's case of whether it's right to do it at this time, when the majority are being asked to stump up more tax (through frozen allowances) to help the county's coffers.....

"We're in it together" is starting to sound very hollow indeed.....

zagfles

vacheron said:

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? 

This makes no sense. Carry forwards has never been limited by the LTA, to do so would be ridiculously complicated.

zagfles

arnoldy said:

Sea_Shell said:

You just know that the opposition will have a field day with those increases.  

"helping the rich" etc etc.


I wonder...IF they did win next time out, will they REVERSE these changes, or suddenly go very quiet on them.  

Yup you can hear the melody of the words now, "...Jade single mother with 3 disabled children can't even afford shoe leather to walk to the foodbank whilst the rich get £1.8 million tax free and can pass that on to their kids" etc etc 

yes that's almost inevitable, but then Jade may eventually get to see the NHS consultant she's been on the 4 year waiting list to see, because the consultant has decided it might still be worth working.

DoublePolaroid

MK62 said:

If the LTA is raised to £1.8M, I wonder if the max tax free cash will rise with it to £450k (currently it's 25% of the LTA, c268k).

 

If so, someone who retired last year with a £1.8M pot would be pretty miffed if there's no backdating........but the rest of the country might be pretty miffed if the chancellor spends what little he has on this kind of tax giveaway......

The optics might well be in the realms of (to borrow a recent phrase) "God, this is awful"..........it's not so much whether it's right or wrong to do this, it's case of whether it's right to do it at this time, when the majority are being asked to stump up more tax (through frozen allowances) to help the county's coffers.....

"We're in it together" is starting to sound very hollow indeed.....

My bet is that this will be explicitly packaged as part of Hunt's plan to "save" the NHS, the health service being utilised as a metaphorical human shield against criticism.

The fact that it will help lots of people entirely unconnected to the health service (and whose voting preference could possibly be influenced by the policy) will be held on the down-low.

artyboy

ex-pat_scot said:

I guess they are heading in the direction of "restoring levels to 10 years ago" and "still lower than when Labour was last in power".

You can't really change AA and not LTA - AA (particularly the 16X calc for deemed input) for DB pension is very tricky to navigate.
Similarly, trying to predict for DC what the future investment returns will be, and future tinkering to LTA limits, are really uncertain.

Neither are ideal, but having headroom is going to be very helpful

It's the first time in a decade that the speculation and kite-flying seems to be certain on what tomorrow's outcome will be.

Selfishly, also for the first time since Brown was chancellor, this would actually be a budget that results in a benefit for me.
Usually I'm in the "suck it up, with the world's smallest violin" target on my back.

I already contribute the max AA of £40,000 for many years, and have no c/f
I'm about 10% off the LTA, so expect to hit the £1.07m some time later next year, if investments plod forward.
At that point, and having hit 55, I could see little rational point in continuing.
Even with the full AA going into my pot, I still edge into the 62% marginal band.

Now- obviously depending on tomorrow's announcement - I'll have to take a fundamental rethink of my plans.
I expect that Mr Hunt will have the desired impact on me - probably delay my "retirement" by a couple of years.
Has it cost him though?
I'll get the benefit of a lower lifetime tax rate on that extra 2 years of income (I'll probably pay about £8000 tax on each £40,000 annual pension contribution when I crystallise it, depending on whatever marginal rate is in play at the time). 
BUT he'll have two additional years of my salary and tax, so an additional £45,000 in tax and NI for each year).
So the net result will be that this "tax break" results in me generating £35,000 to £40,000 additional tax each year, which is a win overall I think.

Of course I will have to plough on for another couple of years though.

One further thing, that hasn't been mentioned recently, would be to extend the 45% rate down to £100,000 and stop the withdrawal of personal allowance. I'm sure that could be made cost - neutral, and remove the ridiculous marginal rate. It would then mean that we aren't trying to dance around limits with pension contributions, reduction in hours etc. (yes I know other marginal rates are similarly ridiculous, but I don't see why this one can't be ironed out with a cost-neutral approach)

Yep, that bold part is me all ways up. For 10+ years I've sucked up every little tax increase with a stoic view that I'm one of the lucky ones and it's for the greater good etc. no one will weep for me and I don't expect them to. But the quid pro quo is that I'm damn well not going to feel guilty if I get some benefit this time round, nor will I take any carp from others about it being a budget for the rich...

On your last point about the personal allowance mess, totally agree that it's desperately in need of simplification - the issue is that I suspect the 45% (or more accurately 47%) rate would probably have to extend down to something like the 80k mark for it to be cost neutral - and i doubt there would be the political will to push it that far. Much better to leave it complicated so that the hideous 62% effective rate is obfuscated...