Budget to boost lifetime allowance for pension savings

marlot

jaypers said:

Keen to understand if the abolishment of LTA applies to those who have already fully crystallised and have excess pension savings that was liable to future tax at 75.

I'd expect that BCE test to be abolished too.  I certainly hope so!

Pat38493

Spare a thought for anybody with LTA liability who has their 75th Birthday on April 5th 2023!

marlot

marlot said:

cfw1994 said:

Crikey.....he just said he was abolishing the LTA.
ABOLISHING it.

Did I mis-hear something?

But the tax free commencement lump sum kept at the current level.

But no mention on how that will be monitored.  I guess instead of reporting LTA usage, pension schemes will need to report PCLS usage?

zagfles

Pat38493 said:

ML420cdi said:

For those currently limited to £4K a year MPAA pension contributions, has anything changed?

Just read "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"....lovely that's what I wanted.

What is the "minimum tapered annual allowance" - is that the amount you can pay in if you have no employment income i.e. the famous £2880 thread?

It's a reduction in the AA for the super rich. So for instance the likes of Gary Lineker on £1million+ salary would only be able to put £10k into a pension without being hit with an AA charge.

NoMore

tiring33 said:

Not sure what the difference between 'removed from April 2023' and 'abolished entirely from April 2024' is.

They are first reducing the charge to zero, as that they can do immediately effectively removing it, the abolishing it altogether takes a act of parliament so will be done in 2024.

Pat38493

NoMore said:

tiring33 said:

Not sure what the difference between 'removed from April 2023' and 'abolished entirely from April 2024' is.

They are first reducing the charge to zero, as that they can do immediately effectively removing it, the abolishing it altogether takes a act of parliament so will be done in 2024.

Also actually it's linked to the capping of the PCLS - it's the LTA amount that effectively prevents you from taking more than 25% of the current LTA, so completely abolishing the LTA now would leave the PCLS uncapped - they need primary legislation to cap the PCLS whilst removing the LTA.

marlot

tiring33 said:

Pensions_matter_2 said:

The Treasury Spring Budget 2023 just published has more detail. 

The Spring Budget 2023 document just published says:

'Workers aged over 50 left the labour market in the greatest numbers during the COVID-19 pandemic. To encourage this group to extend their working lives, the government is increasing tax relief on pensions. The Lifetime Allowance charge will be removed from April 2023 before the Allowance is abolished entirely from April 2024, and the Annual Allowance will be raised to £60,000. These reforms will help ensure that high skilled individuals such as NHS clinicians are not disincentivised from remaining in the workforce.'

Not sure what the difference between 'removed from April 2023' and 'abolished entirely from April 2024' is.

I suspect that this is about the pension commencement lump sum (PCLS).  By abolishing the charge immediately they can still track what's been paid as PCLS.

They will then need a PCLS monitoring system to replace the LTA monitoring system - gives a year to get it up and working?

zagfles

marlot said:

marlot said:

cfw1994 said:

Crikey.....he just said he was abolishing the LTA.
ABOLISHING it.

Did I mis-hear something?

But the tax free commencement lump sum kept at the current level.

But no mention on how that will be monitored.  I guess instead of reporting LTA usage, pension schemes will need to report PCLS usage?

It needs working out - for next tax year it sounds like nothing will change other than the LTA charge being abolished. Then possibly BCEs retained but used to determine how much PCLS is available, or hopefully a better method where for instance you could opt to take PCLS from one pension but not the other eg if you have a DB and DC which exceed the current LTA, you might be able to take the PCLS from the DC even if you crystallise the DB first.

Pensions_matter_2

Would perhaps make sense for them to maintain a maximum pcls figure that can increase (or decrease) in future like the LTA has worked, and work on the basis of percentages used up over time to calculate if maximum reached at any event going forward? 

rickenbacker330

So you get to retain a higher PCLS if you’ve got fixed protection. But if you now start to contribute to a pension again (as the LTA has been scrapped)  I assume you still  lose your fixed protection and therefore lose your higher PCLS amount. I wonder what happens if you’ve already taken a higher PCLS and then lose your fixed protection. Is there a tax liability?