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

RogerPensionGuy

The link below is a blast from the past and it clearly shows how government has just kicked the pension rules all over the place and made it essentially impossible for people to plan for later life effectively. 

Hopefully tomorrow we will see some sensible changes and a new policy that won't allow negative tinkering changes being applied when the wind changes.

I just watched GB News and their expert said LTA is currently 1M.

If pensions were made nice and simple more people would engage and people could just use nice low cost simple pension vehicles and avoid loosing so much value to charges and advisors.



https://www.financialreporter.co.uk/later-life/government-planning-cuts-to-pensions-lifetime-allowance-to-maintain-triple-lock.html

Ciprico

Having a pension of 1.8M would result in inevitably being a higher rate tax payer in retirement so some pension  benefit is reduced.

I appreciate the tfls and iht still will be beneficial 

I've not done the maths but for basic tax payers saving 20% on tax in and paying 40% on tax exiting does not sound good... 

RogerPensionGuy

westv said:

RogerPensionGuy said:

I just watched BBC1 TV at 13:00.

Their expert said only people earning 80K or more PA in their last year of employment would exceed the current LTA. 

So apparently just work for one year at say age 57 on 80K PA and you will exceed the current LTA or work for 45 years and last year at 80K and you will also exceed the LTA. 

It's no wonder so many people shy away from getting involved in pensions and any serious planning for later life, the government need to have sensible rules and any negative changes need at least 20 years lead with protections if required. 

All that assumes a 3/4 final salary pension - which most people don't have.

It's assuming nothing to me, a person earning 80K for one year and plonking it in a SIPP and they now exceeding the current LTA is bonkers wrong unless that 80K goes up by X 14 times on investment returns. 

westv

£80k final = £60k (3/4) x 20 (I think) = £1.2m exceeding current LTA.

westv

Even the BBC has a confusing headline when it comes to the LTA - "Pensions to Get Boost as Tax Free Limit to Rise"
Tax free limit to rise? What?

Albermarle

RogerPensionGuy said:

westv said:

RogerPensionGuy said:

I just watched BBC1 TV at 13:00.

Their expert said only people earning 80K or more PA in their last year of employment would exceed the current LTA. 

So apparently just work for one year at say age 57 on 80K PA and you will exceed the current LTA or work for 45 years and last year at 80K and you will also exceed the LTA. 

It's no wonder so many people shy away from getting involved in pensions and any serious planning for later life, the government need to have sensible rules and any negative changes need at least 20 years lead with protections if required. 

All that assumes a 3/4 final salary pension - which most people don't have.

It's assuming nothing to me, a person earning 80K for one year and plonking it in a SIPP and they now exceeding the current LTA is bonkers wrong unless that 80K goes up by X 14 times on investment returns. 

It is clear they are talking about a DB/final salary pension and not a SIPP.

RogerPensionGuy

Ciprico said:

Having a pension of 1.8M would result in inevitably being a higher rate tax payer in retirement so some pension  benefit is reduced.

I appreciate the tfls and iht still will be beneficial 

I've not done the maths but for basic tax payers saving 20% on tax in and paying 40% on tax exiting does not sound good... 

A pension pot of 1.8M could lose 33% in value and now its say 1.2M.

Drawing out a safe 3%is just 36K PA. 

Plonk state pension on top say 10K.

The above is only 46K.

Currently 40% income tax is about 50K.

So it's not inevitable paying 40% tax on it.

NedS

Ciprico said:

Having a pension of 1.8M would result in inevitably being a higher rate tax payer in retirement so some pension  benefit is reduced.

I appreciate the tfls and iht still will be beneficial 

I've not done the maths but for basic tax payers saving 20% on tax in and paying 40% on tax exiting does not sound good... 

I think it extremely unlikely that the average basic rate tax payer would accumulate a £1.8M pension pot, but even so, being a HR tax payer is never a bad thing as it means you have more income than a BR tax payer.

ex-pat_scot

Another benefit of greater LTA = less likelihood of good series of investment returns blowing through the ceiling, and therefore I can certainly see the benefit in amending the investment risk profile.
(previously, if you were near / expecting to hit LTA, then the sensible thing to do would be to de-risk the pension assets and use your non pension assets for any risk investments. Giving headroom for invesdtment performance and asset growth therefore in the long term should result in a greater tax yield, as the pensions will return greater amounts if remaining invested in more equities, and will be taxed on the way out).

Of course there will still be challenges, even with the new ceilings in place for AA and LTA, but it gives a good amount of breathing space and takes away the need/ temptation to micro manage income, drawdown, contributions, retirement dates etc to manoeuvre around lots of pitfalls.

Albermarle

Another benefit of greater LTA = less likelihood of good series of investment returns blowing through the ceiling, and therefore I can certainly see the benefit in amending the investment risk profile.

Yes that had crossed my mind as well, you can potentially be more aggressive with your pension pot.

Although over the last two years my more aggressively invested ISA has fared worse than my more medium risk SIPP !