Budget to boost lifetime allowance for pension savings

Notepad_Phil

Hmmm, I wonder how the maximum of  £268k tax-free over a lifetime is going to be monitored.

Are they going to expect people to go back over their withdrawal history over perhaps many years of retirement to work out how much tax-free money they've withdrawn, or will they be more pragmatic and use the current percentage used of LTA as a proxy for the total amount of tax-free that someone has received - though they might need to disregard any LTA used by a DB pension, but then again it might be fairer if a DB was counted.

The pragmatic way might annoy anyone who decided to take 0% of a withdrawal as tax-free, and it will mean that anyone who has taken any lump-sums already will not get the £268k max of pcls that is being talked about, but it seems a logical way to do this.

NOVAMET21

If the annuity is £45k a year from £1m pension pot then £90k a year from £2m pension.

I'm assuming people still need to pay 20% and 40% tax respectively in the above annuity?

Do people still need to pay NI?

Also, has the age changed from 55 to 58 or 60?

drjohn67

Drawn pension funds are taxed at usual rates.

No NIC.
If you are short of years to qualify for a full state pension then can pay voluntary NIC.

Annuity? I am not an expert though sure of the benefits.
1000000 at age 60.
Average life expectancy 22 years =45000 per year.
Annuity / insurance company spreads risk so some receive money for shorter periods and others for longer - average. Seemed like the service charges consume all of the fund growth.

Why not simply draw down? The fund would be likely to grow (you may prefer a low risk) and the growth could be a contingency for a longer life or if death <82 then it can be left as inheritance.

Am I missing something?

DreZZ

zagfles said:

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.

Appreciate what you're trying to say but Lineker is a freelancer not employed or paid a salary by BBC.  Who knows what his company structure is and how much salary he is paid by his company.

RSTime

The Spring Budget states "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." Am I correct in assuming that if I take my pension in July and am over the current LTA of £1,073,100 I will not face a tax bill? Am pretty sure the answer is yes but just wanted to confirm!

Am astounded by the decision and in my view the wrong one (even though I will benefit), I think most people would have been happy with an increase in the LTA (with annual inflationary increases) but abolishing does seem to be aimed at the wealthy who have already built up a significant pension pot. There is a cost associated with this and I would rather have seen a modest increase in the LTA and fair pay increases for nurses, doctors etc and more money in the NHS, but I know many in the group will  disagree...  

arnoldy

DreZZ said:

Appreciate what you're trying to say but Lineker is a freelancer not employed or paid a salary by BBC.  Who knows what his company structure is and how much salary he is paid by his company.

In general the rule is you just pay yourself enough salary to swerve paying income tax and NI. You then pay corporation tax and dividend tax which is generally lower - otherwise you wouldn't run your affairs through a company rather than as a sole trader or god forbid PAYE.

kinger101

DreZZ said:

zagfles said:

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?

  Who knows what his company structure is and how much salary he is paid by his company.

Anyone who can use Google to access information in the public domain?

marlot

DreZZ said:

zagfles said:

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.

Appreciate what you're trying to say but Lineker is a freelancer not employed or paid a salary by BBC.  Who knows what his company structure is and how much salary he is paid by his company.

That's in dispute.  https://www.theguardian.com/football/2023/feb/27/gary-linekers-lawyers-say-hmrc-tax-probe-looking-in-the-wrong-place

HUMBUG

Does anyone know more about this inheritance tax loophole?

I quote from an article I've just read:

a. "The Resolution Foundation think tank warned that, because pension pots are classed as outside of estates, people would be able to put unlimited amounts into their pension pots tax-free and then pass it on to their children without incurring inheritance tax."

I've also read the following:

b' "When you die, your estate will not include your SIPP. This means it will be not be subject to tax at the normal rate of 40% for assets above £325,000. As a result, your beneficiaries will be able to receive SIPP death benefits as a lump sum or fixed income."

c. "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." 

d.Can I save a lump sum into my SIPP? Yes. You can often do this online but you might need to contact your pension provider if you need to complete a form.

My questions:
1.  If the Annual Allowance is going to be £60k , how can point  'a'  be correct? There is no unlimited amount you can put into the pension pots tax-free , it will still be £60k .

or are they saying:

2. One can continue putting in £60k pa every year into their pension pot without having to worry about any tax on their contributions above the current limit £1,073,100 ?

3. I'm assuming point 'd' means you can put a one-off lump sum up to the max of 60k into a SIPP if you wished (if you are working)?

4. On this HMRC site link below, there are 2  ways inherited pensions can avoid paying tax  but the person who died must be under 75. So again, doesn't this seems to contradict point 'a' above unless of course the person dying is under 75?

Tax on a private pension you inherit - GOV.UK (www.gov.uk)

Most lump sums	Defined contribution or defined benefit	Under 75

Annuity or money from a new drawdown fund (set up or converted and first accessed from 6 April 2015)	Defined contribution	Under 75

artyboy

Humbug - I think you're overcomplicating this. The point is that whatever is left in your DC pension pot upon death sits 'outside your estate' by virtue of the fact it's in trust, and is paid out to your nominated beneficiaries at the discretion of the trustees.

That amount is technically unlimited, and was unlimited from an IHT perspective even before the latest LTA changes. The only constraint was on how much you could pay in and how much investment growth it gained (less of course anything you withdrew when retired)

The over/under 75 at death point relates to whether income tax and not IHT is payable by the beneficiary/ies.

Oh, and it's not a 'loophole', apologies but frankly I've had it up to here with hyperbole over the past 2 days