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

Sea_Shell

MK62 said:

[....] and personally, I'm extremely sceptical that raising the AA will do anything to solve staff retention issues.

Are you [all] talking about the MPAA (£4k), or the £40,000 allowance?

If the MPAA, I thought that.  How would that incentivise anyone to keep working, given the choice?

I suppose they could access more of their pension, and still contribute any higher amount to their pension, whilst continuing to work.  But if you've made your mind up to go, it doesn't act as an incentive not to.

And if you've already retired, it's not enough of a carrot to entice you back, I would have thought.

As a "pre-COVID" early retiree*, any increase in the allowances (of either kind) would do nothing to entice us back.    But then nothing short of financial collapse would entice us back! 




*Funny how I feel I should point this out, as we didn't make our decisions because of the pandemic!   We aren't one of "them" 

MoneySavingGerbil

I don't see increasing the LTA as encouraging anyone back to work. It might just stop a few people retiring if they're close to it, but I doubt anyone retires just because they've hit LTA.

If they really want people to keep working then why not freeze the LTA at it's current level as the base amount, but link future increases for each individual to their NI contributions? Contribute (not buy) enough weeks worth of NI contributions and get a CPI linked increase in your LTA. That way as long as you keep working your LTA keeps increasing. I just don't see this kind of tinkering working though. Not least because of the IT changes needed and how most public sector IT projects go way over budget in time and cost. By the time they've made the IT changes our jobs will all have been taken by robots ;-)

Grumpy_chap

MoneySavingGerbil said:

I don't see increasing the LTA as encouraging anyone back to work. It might just stop a few people retiring if they're close to it, but I doubt anyone retires just because they've hit LTA.

Is the real root cause of the early retirees linked to AA or LTA?
How come so many "ordinary" people have reached LTA?
Is that because of the cliff-edge tax bands that encourage far higher pension contributions?  
 - At £50k for those with child benefit considerations
 - At £100k where the withdrawal of personal allowance kicks in (plus the childcare eligibility for some).
If these cliff-edges did not exist, some would spend more now and contribute less to pension, so the numbers with affordability to retire early would be fewer.

There was a recent thread where someone is weighing up putting all their bonus into pension versus enjoying some of the pension now:
https://forums.moneysavingexpert.com/discussion/6431520/tax-avoidance-pension-payment#latest
By making extra pension contributions now, the likelihood of this person, and others like them, retiring early increases.

Sea_Shell

Grumpy_chap said:

MoneySavingGerbil said:

I don't see increasing the LTA as encouraging anyone back to work. It might just stop a few people retiring if they're close to it, but I doubt anyone retires just because they've hit LTA.

Is the real root cause of the early retirees linked to AA or LTA?
How come so many "ordinary" people have reached LTA?
Is that because of the cliff-edge tax bands that encourage far higher pension contributions?  
 - At £50k for those with child benefit considerations
 - At £100k where the withdrawal of personal allowance kicks in (plus the childcare eligibility for some).
If these cliff-edges did not exist, some would spend more now and contribute less to pension, so the numbers with affordability to retire early would be fewer.

There was a recent thread where someone is weighing up putting all their bonus into pension versus enjoying some of the pension now:
https://forums.moneysavingexpert.com/discussion/6431520/tax-avoidance-pension-payment#latest
By making extra pension contributions now, the likelihood of this person, and others like them, retiring early increases.

In our case, those things had NOTHING to do with our decision to retire early.  

Pension freedoms to access at 55, were the main driver.     But we had been saving in ISA's as at the time of aiming for early retirement, pension freedoms weren't yet a thing.    So we had planned to bridge the gap at the time.   A gap that has evaporated.

NedS

MoneySavingGerbil said:

I don't see increasing the LTA as encouraging anyone back to work. It might just stop a few people retiring if they're close to it, but I doubt anyone retires just because they've hit LTA.

Apparently a lot of NHS consultants (and others) do.

MoneySavingGerbil said:

If they really want people to keep working then why not freeze the LTA at it's current level as the base amount, but link future increases for each individual to their NI contributions? Contribute (not buy) enough weeks worth of NI contributions and get a CPI linked increase in your LTA. That way as long as you keep working your LTA keeps increasing. I just don't see this kind of tinkering working though. Not least because of the IT changes needed and how most public sector IT projects go way over budget in time and cost. By the time they've made the IT changes our jobs will all have been taken by robots ;-)

Innovative solution, but I think we need to simply pension/tax rules, not make them more complicated trying to dig ourselves out of a hole.

Superdude0499

Since the main retirement saving vehicle is pension the only way to really stop early retirement wannabes is to up the age of access to pension pots further. 60 maybe?

People may well then just pile into ISA’s but I think the overall benefit of pension contributions, especially with sal sac, would sway people to still use it as their main saving vehicle.

Upping the LTA and AA limits so that some people can have even more than enough won’t encourage them to return to work or stay on longer. 

aldershot

MoneySavingGerbil said:

I don't see increasing the LTA as encouraging anyone back to work. It might just stop a few people retiring if they're close to it, but I doubt anyone retires just because they've hit LTA.

I did five years ago at age 54. Ever since 2010, I resented paying 60% tax as I was earning £100-150k pa and shovelled all I could into a SIPP to keep my taxable earnings at £100k. I would probably never had started if Osborne hadn’t introduced that particular quirk. A fortunate choice of investments (I used to work with Terry Smith) and a long bull market, combined with a legacy DB pension, pushed me over the LTA. Offered a 12 month redundancy payout as the result of company restructuring, I said thanks vm and I’m off. Absolutely no regrets. When you have enough, do something else. It’s too easy to just say one more year. I would have hated working during 2020-22. 

MoneySavingGerbil

aldershot said:

MoneySavingGerbil said:

I don't see increasing the LTA as encouraging anyone back to work. It might just stop a few people retiring if they're close to it, but I doubt anyone retires just because they've hit LTA.

Offered a 12 month redundancy payout as the result of company restructuring, I said thanks vm and I’m off. Absolutely no regrets. When you have enough, do something else. It’s too easy to just say one more year. I would have hated working during 2020-22. 

That's kind of my point though. The LTA is one of several factors and not enough in itself to make most people quit solely because they've hit it. In your case the company was restructuring, you were offered redundancy and you were over LTA. The combined factors added up to make your decision to go easier. Given you felt comfortable enough financially to retire at 54 are you really saying that if you hadn't hit the LTA you'd would have stayed in work and not taken the redundancy? It sounds like the effective 60% tax bracket between £100K and £125K was a bigger annoyance to you and hitting the LTA early was a consequence of trying to avoid it.

Of all the things that Hunt could do next week raising the LTA seems one of the least likely to happen and very unlikely to actually make people stay in work longer. I'd rather he ditched the stealth 60% bracket which seems particularly vindictive (but also equally unlikely to change)

RogerPensionGuy

I agree the LTA certainly isn't the only pension rule or value that needs adjustments soon to put pension rules/values/figures back to a normal reasonable place espically considering inflation and market volatility.

They also need to stop tinkering all the time as prudent or even casual planning is just best guessing these last 12 years, they need to make sensible changes and give stability. 

If they need to change in the future, any downwards shifts that will affect people need long lead times with various protections for people to avoid be disadvantaged. 

For me personally unless the LTA is increased I will indeed stop paid employment this summer as personally my time, pay and pensions just don't add up for me and I'm in an industry that's absolutely desperate for people and especially with good experience. 

Time will tell what they do.

Qyburn

Unless I miss something the Annual Allowance, at least as it affects DC pensions, can only be a limit for the really well off.  Those who year after year have more than £40,000 spare earnings that they know they won't need to access until they reach pension age.

I believe there are other factors with DB pensions, something like including the increase in accrued benefits.  I don't really understand that but it sounds almost as if it was equivalent to including increased value of DC pension investments as well as actual contributions.  If there's some anomaly meaning that the AA affects low paid employees with DB pensions, then maybe it would be better to fix that rather than lifting the limit to benefit mainly top earners.