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

zagfles

artyboy said:

Will be interesting to see how long the intention is to freeze the PCLS - if it's just a few years then no biggie, but could it be a sneaky way to eliminate it over the long term through inflation? 

Certainly if I were a 20-something being encouraged to join a pension scheme, it would be a bit of a disincentive to think that my PCLS in 40 years would barely buy me a cup of tea!

On the flip side, it's just more incentive for me to get the max out as soon as it's accessible..

If inflation is that high they'd be screwed anyway!

I suspect it'll stay frozen for the forseeable future, plenty of people eg IFS were suggesting a lower PCLS of something like £50-100k, so maybe until it's at that sort of real term level.

artyboy

zagfles said:

artyboy said:

Will be interesting to see how long the intention is to freeze the PCLS - if it's just a few years then no biggie, but could it be a sneaky way to eliminate it over the long term through inflation? 

Certainly if I were a 20-something being encouraged to join a pension scheme, it would be a bit of a disincentive to think that my PCLS in 40 years would barely buy me a cup of tea!

On the flip side, it's just more incentive for me to get the max out as soon as it's accessible..

If inflation is that high they'd be screwed anyway!

I suspect it'll stay frozen for the forseeable future, plenty of people eg IFS were suggesting a lower PCLS of something like £50-100k, so maybe until it's at that sort of real term level.

Yep, all the more reason to get it out as soon as you can, and manage/live off it outside the wrapper.

The other detail will be, if someone has taken out £268,275 (and I agree with Albermarle, why could it not have been rounded up to an easier to remember number - like £1m  ), then will that work on a percentage utilisation basis (like LTA) or will they be able to take advantage of any future raises to the limit...

dunstonh

Will be interesting to see how long the intention is to freeze the PCLS - if it's just a few years then no biggie, but could it be a sneaky way to eliminate it over the long term through inflation? 

My gut is that it will morph into an eventually rounded figure at some point. i.e. 25% upto £x is tax free.

The workings are going to be interesting though as this suggests provider and scheme administrators are going to have to retain LTA style information.   

Plus, its unclear what impact this will have on those with protected tax free cash as that required a step based calculation that used both the current LTA and the maximum the LTA has been.

zagfles

artyboy said:

zagfles said:

artyboy said:

Will be interesting to see how long the intention is to freeze the PCLS - if it's just a few years then no biggie, but could it be a sneaky way to eliminate it over the long term through inflation? 

Certainly if I were a 20-something being encouraged to join a pension scheme, it would be a bit of a disincentive to think that my PCLS in 40 years would barely buy me a cup of tea!

On the flip side, it's just more incentive for me to get the max out as soon as it's accessible..

If inflation is that high they'd be screwed anyway!

I suspect it'll stay frozen for the forseeable future, plenty of people eg IFS were suggesting a lower PCLS of something like £50-100k, so maybe until it's at that sort of real term level.

Yep, all the more reason to get it out as soon as you can, and manage/live off it outside the wrapper.

The other detail will be, if someone has taken out £268,275 (and I agree with Albermarle, why could it not have been rounded up to an easier to remember number - like £1m  ), then will that work on a percentage utilisation basis (like LTA) or will they be able to take advantage of any future raises to the limit...

I somehow doubt it'll ever be raised. How it'll work probably hasn't even been decided, the budget document says the LTA removal will be in a future finance bill, for now the LTA remains with the associated link to the PCLS, but there is no LTA charge. (I presume that means just the 25% charge, if they're removing the 55% lump sum charge that would mean everone above the LTA can take the excess completely tax free!)

RogerPensionGuy

artyboy said:

zagfles said:

artyboy said:

Will be interesting to see how long the intention is to freeze the PCLS - if it's just a few years then no biggie, but could it be a sneaky way to eliminate it over the long term through inflation? 

Certainly if I were a 20-something being encouraged to join a pension scheme, it would be a bit of a disincentive to think that my PCLS in 40 years would barely buy me a cup of tea!

On the flip side, it's just more incentive for me to get the max out as soon as it's accessible..

If inflation is that high they'd be screwed anyway!

I suspect it'll stay frozen for the forseeable future, plenty of people eg IFS were suggesting a lower PCLS of something like £50-100k, so maybe until it's at that sort of real term level.

Yep, all the more reason to get it out as soon as you can, and manage/live off it outside the wrapper.

The other detail will be, if someone has taken out £268,275 (and I agree with Albermarle, why could it not have been rounded up to an easier to remember number - like £1m  ), then will that work on a percentage utilisation basis (like LTA) or will they be able to take advantage of any future raises to the limit...

I was expecting the 25% tax-free not be allowed on anything above 1.2M/300K and it would of been perfect for me if it went up to the 1.8M/450K zone and yes, just moving it to 1.2/M300K would of made it look more simple.

I would like the this 268K to go up in the future but I expect they will tinker again down the road and it will become 1M/250K, 800K/200K less or removed at some point.

Malthusian

artyboy said:

Will be interesting to see how long the intention is to freeze the PCLS - if it's just a few years then no biggie, but could it be a sneaky way to eliminate it over the long term through inflation? 
Certainly if I were a 20-something being encouraged to join a pension scheme, it would be a bit of a disincentive to think that my PCLS in 40 years would barely buy me a cup of tea!

The PCLS was already frozen at £268,275. Last Wednesday the only person who expected Lifetime Allowance to ever increase  beyond £1,073,100 was Jeremy Hunt. (And a handful of civil servants. Or possibly nobody at all.)
So anyone who refused to save into a pension scheme if they couldn't expect a tax free lump sum of more than £268,275 (nominal) wasn't going to already.

drjohn67 said:

Late birthday gift - thank you! 

I had anticipated paying a £30000 charge on what is now (again) a TFLS that is waiting to be drawn and £50000 charge on the remaining pension pots waiting to be drawn. 

I will have had tax breaks of 25-40% on these contributions and will pay tax at 34-35% when claiming these amounts, that would have been in excess of the LTA, so it feels fair to be repaying the original tax breaks.

Not sure what the next government (?Labour) will do with LTA and pensions so I will be cashing all in this year. 

Hold up - you're cashing in all of a pension worth about £266,666 at once, paying a massive amount of unnecessary tax, because you're overjoyed at the government saving you a smaller amount of tax? Have I misunderstood?

shortseller09

RogerPensionGuy said:

 and it would of been perfect for me if it went up to the 1.8M/450K zone and yes, just moving it to 1.2/M300K would of made it look more simple.

Roger please, it's 'would have'

artyboy

Malthusian said:

artyboy said:

Will be interesting to see how long the intention is to freeze the PCLS - if it's just a few years then no biggie, but could it be a sneaky way to eliminate it over the long term through inflation? 
Certainly if I were a 20-something being encouraged to join a pension scheme, it would be a bit of a disincentive to think that my PCLS in 40 years would barely buy me a cup of tea!

The PCLS was already frozen at £268,275. Last Wednesday the only person who expected Lifetime Allowance to ever increase  beyond £1,073,100 was Jeremy Hunt. (And a handful of civil servants. Or possibly nobody at all.)
So anyone who refused to save into a pension scheme if they couldn't expect a tax free lump sum of more than £268,275 (nominal) wasn't going to already.

drjohn67 said:

Late birthday gift - thank you! 

I had anticipated paying a £30000 charge on what is now (again) a TFLS that is waiting to be drawn and £50000 charge on the remaining pension pots waiting to be drawn. 

I will have had tax breaks of 25-40% on these contributions and will pay tax at 34-35% when claiming these amounts, that would have been in excess of the LTA, so it feels fair to be repaying the original tax breaks.

Not sure what the next government (?Labour) will do with LTA and pensions so I will be cashing all in this year. 

Hold up - you're cashing in all of a pension worth about £266,666 at once, paying a massive amount of unnecessary tax, because you're overjoyed at the government saving you a smaller amount of tax? Have I misunderstood?

IIRC, the LTA was previously being frozen for a defined period, therefore it was reasonable to think that it, and the tax free element, would increase in future. If there is similar language in the new bill suggesting that the PCLS will be frozen for (say) 5 years and then reviewed, that would be a heck of a lot more reassuring than that it was going to be frozen sine die 

But as I said, if it were to increase in future (and I'm pessimistic myself) then would that create more headroom for people that have already taken the max, or will they be seen to have used up '100%'

retiringtoosoon

and the moneybox expert got the two mixed up....
" the AA has been completely removed"

/sigh

Gerbert

So is there any significant distinction now between the crystallised and uncrystallised part of one's DC pension pot?

Suppose I have a pot of say £1.0M, and wish to gradually crystallise over a period of years, taking 25% of each portion as PCLS.

Before this change I would each year crystallise (say) £200K, taking £50K tax-free (perhaps decanting £20K into an ISA.  So £50K has been removed from the pot and any subsequent increase in its invested value is no longer taken into account in calculating percentage of LTA and so on.  After a few years of doing this either the entire pot has been crystallised, or else I hit 75 which forces the rest to crystallise automatically (and a final PCLS and a potential LTA charge).  Now any further (necessarily crystallised) monies I withdraw are subject to tax at my marginal rate.  This distinction between the crystallised funds I can draw down, and the uncrystallised funds I cannot (before they in their turn are crystallised) seems to make some sort of sense

Now: I simply take £50K tax-free every year up to a maximum of the lower of <£268275, 25% of the current value of my pension pot>.  After that I can take similar or other amounts, but they will now be taxed at my marginal rate.  Yes one can theoretically speak of "crystallised funds" in the pot - these will notionally be three times whatever I withdrew as PCLS (so that PCLS is 25% of the crystallised total) but the term no longer seems to so any useful work.

What am I missing?