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

ex-pat_scot

Pat38493 said:

JoeCrystal said:

 The maximum Pension Commencement Lump Sum for those without protections will be retained at its current level of £268,275 and will be frozen thereafter.

Does mean the tax free cash part of DC is also being frozen / capped at a fixed amount rather than 25%?  So the value of the tax free cash part will slowly fall in real terms?

Yes = once you hit the current LTA of £1.073m, 25% of it is the quoted £268,275.
Thus, if you are continuing to work and go beyond the £1.073m threshold, then I guess the sensible thing would be to take the max tax free cash and re-wrap into ISAs as quickly as possible.

Pat38493

artyboy said:

JoeCrystal said:

Reforming pension tax thresholds – The government will increase the Annual Allowance from £40,000 to £60,000 from 6 April 2023. Individuals will continue to be able to carry forward unused Annual Allowances from the 3 previous tax years.

The government will increase the Money Purchase Annual Allowance from £4,000 to £10,000 and the minimum Tapered Annual Allowance from £4,000 to £10,000 from 6 April 2023. The adjusted income threshold for the Tapered Annual Allowance will also be increased from £240,000 to £260,000 from 6 April 2023.

The government will also remove the Lifetime Allowance charge from 6 April 2023, before fully abolishing the Lifetime Allowance in a future Finance Bill. The maximum Pension Commencement Lump Sum for those without protections will be retained at its current level of £268,275 and will be frozen thereafter.

Linking open and closed public service pension schemes – Open and closed public service pension schemes for a given workforce will be considered linked for the purposes of calculating Annual Allowance charges, thus allowing members to offset any negative real growth for Annual Allowance purposes in legacy public service pension schemes against the Annual Allowance. This will be legislated for through secondary legislation and will apply from April 2023 tax year.

....aaaaaaand, THERE'S the catch. Although is PCLS a DB scheme specific term?

I don't think so because all the government tax manuals on gov.uk refer to PCLS even when they supposedly also apply to tax free cash from DC.  It's the same with the pension recycling guidelines.

zagfles

JoeCrystal said:

The government will also remove the Lifetime Allowance charge from 6 April 2023, before fully abolishing the Lifetime Allowance in a future Finance Bill. The maximum Pension Commencement Lump Sum for those without protections will be retained at its current level of £268,275 and will be frozen thereafter.

This is a bit odd. Remove the LTA charge? I can understand removing the 25% charge for drawdown, but do they mean remove the 55% charge for lump sum?? That would mean anything over the LTA could be taken as a lump sum - tax free!! Surely not??

Pat38493

zagfles said:

JoeCrystal said:

The government will also remove the Lifetime Allowance charge from 6 April 2023, before fully abolishing the Lifetime Allowance in a future Finance Bill. The maximum Pension Commencement Lump Sum for those without protections will be retained at its current level of £268,275 and will be frozen thereafter.

This is a bit odd. Remove the LTA charge? I can understand removing the 25% charge for drawdown, but do they mean remove the 55% charge for lump sum?? That would mean anything over the LTA could be taken as a lump sum - tax free!! Surely not??

I think it's maybe a technical distinction - it  means that they will change the rates to zero for this tax year because abolishing it altogether requires primary legislation.  I took it to mean that the net effect is the same and it just needs to be abolished for housekeeping purposes later.

dunstonh

PCLS is not specific to DB.  Its all.

I also noticed MPAA is increasing to £10,000 from April 23.

Cus

zagfles said:

JoeCrystal said:

The government will also remove the Lifetime Allowance charge from 6 April 2023, before fully abolishing the Lifetime Allowance in a future Finance Bill. The maximum Pension Commencement Lump Sum for those without protections will be retained at its current level of £268,275 and will be frozen thereafter.

This is a bit odd. Remove the LTA charge? I can understand removing the 25% charge for drawdown, but do they mean remove the 55% charge for lump sum?? That would mean anything over the LTA could be taken as a lump sum - tax free!! Surely not??

You would still have to pay income tax at your marginal rate I assume?

zagfles

Cus said:

zagfles said:

JoeCrystal said:

The government will also remove the Lifetime Allowance charge from 6 April 2023, before fully abolishing the Lifetime Allowance in a future Finance Bill. The maximum Pension Commencement Lump Sum for those without protections will be retained at its current level of £268,275 and will be frozen thereafter.

This is a bit odd. Remove the LTA charge? I can understand removing the 25% charge for drawdown, but do they mean remove the 55% charge for lump sum?? That would mean anything over the LTA could be taken as a lump sum - tax free!! Surely not??

You would still have to pay income tax at your marginal rate I assume?

The rules now are you can take the excess over the LTA as a lump sum subject to a 55% charge and NO income tax, or put it into drawdown subject to a 25% charge plus income tax on withdrawals.

They say the LTA charge is being "removed". If that is literally correct, then excess over LTA can be taken completely tax free using the lump sum rule! At least next tax year, before the LTA is abolished.

I guess we'd have to check the legislation

Pat38493

zagfles said:

Cus said:

zagfles said:

JoeCrystal said:

The government will also remove the Lifetime Allowance charge from 6 April 2023, before fully abolishing the Lifetime Allowance in a future Finance Bill. The maximum Pension Commencement Lump Sum for those without protections will be retained at its current level of £268,275 and will be frozen thereafter.

This is a bit odd. Remove the LTA charge? I can understand removing the 25% charge for drawdown, but do they mean remove the 55% charge for lump sum?? That would mean anything over the LTA could be taken as a lump sum - tax free!! Surely not??

You would still have to pay income tax at your marginal rate I assume?

The rules now are you can take the excess over the LTA as a lump sum subject to a 55% charge and NO income tax, or put it into drawdown subject to a 25% charge plus income tax on withdrawals.

They say the LTA charge is being "removed". If that is literally correct, then excess over LTA can be taken completely tax free using the lump sum rule! At least next tax year, before the LTA is abolished.

I guess we'd have to check the legislation

I'm pretty sure that's not what they are intending to happen, but I suppose someone could try it if they simply change the charge rates % to zero.  I'm sure the intention is that you would still pay your marginal rate of tax on the amount withdrawn.

Gerbert

¨The maximum Pension Commencement Lump Sum for those without protections will be retained at its current level of £268,275 and will be frozen thereafter.¨

And presumably for those with say Fixed Protection 2016 (which fixed the LTA at 1.25M) it would be 25% of this latter amount, viz 312.5K?  Does anyone know differently?

Malthusian

A lump sum taken under the current rules with a 55% LTA tax charge is a specific kind of withdrawal called a "lifetime allowance excess lump sum", which can only be drawn once you've used up your lifetime allowance. If there's no more lifetime allowance to use up you can't draw a lifetime allowance excess lump sum...
This doesn't fully address this weird situation in 23/24 where the LTA has apparently not yet been abolished but the LTA charge is zero. But we can assume all funds in excess of the PCLS will become taxable withdrawals, as the alternative is too implausible.