Budget to boost lifetime allowance for pension savings

JamTomorrow

I'd be much happier paying 45% from a lower income threshold rather than this nonsense where I now have a zero pension contribution one year and an £80k pension contribution the next so that I at least eliminate the 62% rate in one year and save the 20% on £25k of income.

I feel most sorry for those single income families with 3 kids growing their income from £50k to £60k and incurring an effective marginal rate of ~70% in the process from loss of child benefit (and higher if they are paying off student loans).  Shocking complexity that needs to revised.

drjohn67

If simplifying the prediction and assuming that this will be of more limited value to those with already part/fully crystallised allowance.

Interesting to see whether those encouraged to stay in work outweigh the number who are more able to retire if their pension value suddenly improves.

Other factors such as working conditions/environment and feeling valued will also be critical.

fifer60

LTA for crystalised pensions is calculated as an accumulated % of the LTA. When the threshold was reduced, the % was maintained. 

What will happen if the LTA is now increased?

Example: Mary retires and takes her main pension value £1m and is told that she has used 93% of LTA. If the LTA is increased to £1.8m will she get £0.8m of headroom or £126k?

Natural fairness says the former, but conflicts with the previous % practice.

Flugelhorn

fifer60 said:

LTA for crystalised pensions is calculated as an accumulated % of the LTA. When the threshold was reduced, the % was maintained. 

What will happen if the LTA is now increased?

Example: Mary retires and takes her main pension value £1m and is told that she has used 93% of LTA. If the LTA is increased to £1.8m will she get £0.8m of headroom or £126k?

Natural fairness says the former, but conflicts with the previous % practice.

this is what I want to know - crystalised 101.1% and am hoping to get a bit more headroom but sounds like like I might not get any more 

GrubbyGirl_2

drjohn67 said:

It is possibly not going to be an extra amount available for those who have already crystalised pension benefits. 
Hence, it may not encourage people to return.
Could also have the opposite effect if a significant proportion decides to retire/crystalise now because their benefits are suddenly improved, or to avoid the risk of it being reduced again in future. (Lifetime protection may not always be available).

Highly experienced senior doctors are a limited asset of value to society.
Not retaining juniors, emigration, or having a tranche bailing out and retiring now risks destabilising NHS services further (not just during industrial action). That would be hard to recover from. 

Indeed, those of us who retired and paid a £40k bill certainly wont be encouraged back to work

drjohn67

Cashed in NHS pension to avoid high inflation growing the fund (getting the inflationary uplift to pension without the pension tax charge). Left other benefits uncrystallised hoping to reduce the pension tax charge should the workforce crisis ever materialise.

Sadly, although I could return to work, the tax applied would start at higher rate and easily breach the 62% threshold which is a disincentive given the atrocious conditions and risk that I would be returning to.  Most critical, the contentment from being more present at home is hard to compromise on/give up.  

I think that the government will recognise such barriers to returning and prioritise reducing the numbers retiring from now. Predict just a % increase of remaining LTA rather than extra headroom.

Feels like a First World problem compared to the sacrifice/hardships that I went through coming from an inner city ghetto to get to a relatively comfortable position. 

Cus

Would there be an increase in the tax free sum to £450k?

Albermarle

Cus said:

Would there be an increase in the tax free sum to £450k?

Under current rules yes, but until all the details are known you can not be sure about anything.

LHW99

Be good to see an increase in the amount non-earning people could pay into a pension per year. £3600 is very low and has been the same since 2001

prowla

£1.8m/year - well that's fine and dandy!