yes!!!!!

Albermarle

 I despise this kind of politics its great soundbites and headlines

Is there any other kind of democratic politics in reality? 

This is completely useless for the very rich. It's very good for those on £100-260k

So I guess the headlines should not have said Giveaway for the Top 1% , but Giveaway for the Top 0.5% to 2% ?

In fact if the LTA stays abolished, but the pensions IHT exemption is watered down in some way at some point, some people in those income brackets ( or previously  in those brackets and now retired ) might end up worse off. Although being dead you will not feel the pain !

zagfles

Albermarle said:

 I despise this kind of politics its great soundbites and headlines

Is there any other kind of democratic politics in reality? 

This is completely useless for the very rich. It's very good for those on £100-260k

So I guess the headlines should not have said Giveaway for the Top 1% , but Giveaway for the Top 0.5% to 2% ?

In fact if the LTA stays abolished, but the pensions IHT exemption is watered down in some way at some point, some people in those income brackets ( or previously  in those brackets and now retired ) might end up worse off. Although being dead you will not feel the pain !

Maybe headline should read "Tories heed Labour advice to abolish pension limit"

In reality there's no substantive difference between the parties on this. The changes yesterday make the system more similar to the original introduction of the LTA/AA under Labour in 2006. The parties could have easily agreed a sensible solution that people could have confidence would survive a general election.

But that's not how democratic politics works. You have to show people you are different to the other side, otherwise why would they vote for you? You have to create divisions, you have to pretend to be on their side, you have to pretend the other side don't care about you and people like you, only their "own sort".

So this change presented a perfect opportunity to create those divisions. It's nothing about the policy itself and the effect, it's about soundbites to convince stupid people that "we're on your side, the other lot aren't".

MK62

zagfles said:

MK62 said:

zagfles said:

Qyburn said:

zagfles said

Yes, but now the Tories have done it they see an opportunity to gain political capital out of the tired old trope of "Tories looking after their rich mates"

In support of these changes people go on about doctors and similar. But those are DB pensions, so the perceived issue could have been fixed by changing how both LTA and AA are calculated for DB pensions, where there is no actual pot to compare with LTA and no actual employer contributions to compare with AA.

Making changes the way they have ensures that all of the richest can benefit, whether friends of the Tories or not. BBC reckons less than 4% of earners will benefit.

The very richest will hardly benefit at all. The AA taper is still in place, although raised a bit to £10k, so anyone earning over £260k will have their AA reduced, down to £10k if they earn over £360k

The people who benefit most are those on around £100-260k

.....but the very richest might well be set to benefit very significantly from the abolition of the LTA.

How exactly? As they can only put £10k a year in going forwards, and were restricted to £4k a year till now? Maybe they already piled in during 2006-2010 under the last Labour govt while the LTA was £1.8 million and AA was £250k and no taper? In which case they'd have probably used protections when the Tories reduced the LTA/AA and stopped payments to avoid further AA and LTA hammering.

This is completely useless for the very rich. It's very good for those on £100-260k

The"rich" have only been restricted to £4k pa since 2020, and £10k pa 2016-2020........in fact, someone contributing the full AA every year since it's introduction in 2006, and subject to the full AA taper since 2016,  would still have put in £1.457M in contributions alone - add in the growth and the "pot" would likely be over £3M today (and could be £4M+).......and that's just the last 17 years.

It's true that since 2016, the AA taper has restricted the rich from fully benefiting from pensions (unfairly in my view tbh), but prior to that a significant pension could have been built up.

They could have used a protection, IF they qualified at the time AND were happy with any future restrictions, but that would at the  most be £1.8M (OK, it's possible it could be higher with Enhanced Protection, but anyone with that would not have been able to contribute any more since 2006 - for these few abolishing the LTA will make no difference as effectively they weren't subject to it anyway.....and Primary Protection, but that meant having a pension already worth more than £1.5M back in 2006)

They could have voluntarily stopped contributing, but this might well mean the loss of "employer" contributions too, as well as salary sacrifice, and so might well end up costing more than the LTA charge they were trying to avoid anyway.

So far from being useless, it'll be of benefit to anyone without LTA protection and a pension above £1.073M, and almost anyone with LTA protection with a pension worth over 1.25/1.5/1.8M (depending on the protection held).

People might say that the rich might have avoided pensions for the above reasons.......but what were the alternatives......ISAs are limited to 20k pa now, but even that wasn't always so between 2006 and today........and most other forms of saving either gave very low returns (ie cash) or else came with other taxes attached on top of income tax/NI..(eg CGT), or else were on the higher risk side of things (VCTs etc).......and that's quite apart from estate planning and IHT considerations (and I'm not going into forest planting etc and other tax "avoidance" schemes.. )

ex-pat_scot

Agreed.
I think the main benefit of removing the LTA is to provide long term horizon planning certainty for those many years off retirement, rather than a short term bung to stop the haemorrhaging of doctors on the cusp of retirement.
If I were 35 or 40, and looking at what to contribute now, and what headaches it might bring further down the line, then removing LTA is a great problem that has just disappeared.

I hate the short term pantomime politics on this - particularly as members of the opposition were actually proposing this, not so long ago.

Pat38493

dunstonh said:

Making changes the way they have ensures that all of the richest can benefit, whether friends of the Tories or not. BBC reckons less than 4% of earners will benefit.

It generally wont benefit the real top earners as they are handicapped by tapering.   It will benefit the medium to high earners.  However, the number of people being captured by the LTA was increasing quickly.    It was a growing problem.   

Plus, many people with DC pensions manage the problem by either crystallising early and waiting until age 75 for the final check or delay crystallising or phase it knowing it will be inevitable at some point.   Those people won't make the 4% that the BBC is referring to but they are affected by it.  

It would be far more helpful if they published a figure that reflected those that are going to be affected by it, even if they are not currently in a position to be affected by it.

If basic rate taxpayers are being captured by it, then it ceases to be a tax on the very wealthy.

I suspect that the average person would consider people even on 100K as high earner and not medium, but anyway I agree the 1% or 4% number could bea  bit misleading as it doesn't account for people who haven't yet breached the LTA but will in the next decades.

peterg1965

So, bit of a technical question on the maximum PCLS figure and how you are measured against it, with a combination of DB and DC pensions.

I am in the fortunate position of having a very good DB pension, which came into payment from 2015 when i was 49. It was measured against the LTA (then £1.25M) and I used 61.59% of LTA, with the calculation of 23 (20+3 Lump sum) x annual pension.  Since then I have crystalized part of a DC pension and used a further 23.76% (£266K) with a PCLS of £66K, a further crystallization of a DC pot with a £9870 PCLS (3.66%) (£39.7K).

So with a maximum allowable tax free PCLS of £268,275, i would be interested to find out how I am measured and tracked against how much tax free money i have used out of that figure.

I think the calculation would be  3 x annual pension from my DB - £99K + £66K and £9.9K from DC = £174.9K.  That would mean I have £93.4K left, so a further £374K pension savings available to achieve that figure.

If that is correct, then i am unlikely to reach that max PCLS figure, BUT if i did, I will have effectively will have had a pot of £1.44M to have been able to receive the £268275 max figure.  Does this make sense?

I guess the distortion is caused by a combination of DC and DB

MK62

AFAIK, it's as yet unconfirmed as to how exactly this new PCLS limit will work in practice and how it will be monitored. The more you think about it, the more a can of worms it becomes.......

Pat38493

I would guess that they will just use the same approach that was used with LTA for the minute i.e. you will get 39% of your LTA available so you would be able to take a corresponding PCLS.

The way it's been done up to now is it's based on the % not the amount - therefore you would be able to take 25% of 39% of your 1.073m.

Since the systems are already in place that control this, I guess this is the most pragmatic solution in the short term.

zagfles

MK62 said:

zagfles said:

MK62 said:

zagfles said:

Qyburn said:

zagfles said

Yes, but now the Tories have done it they see an opportunity to gain political capital out of the tired old trope of "Tories looking after their rich mates"

In support of these changes people go on about doctors and similar. But those are DB pensions, so the perceived issue could have been fixed by changing how both LTA and AA are calculated for DB pensions, where there is no actual pot to compare with LTA and no actual employer contributions to compare with AA.

Making changes the way they have ensures that all of the richest can benefit, whether friends of the Tories or not. BBC reckons less than 4% of earners will benefit.

The very richest will hardly benefit at all. The AA taper is still in place, although raised a bit to £10k, so anyone earning over £260k will have their AA reduced, down to £10k if they earn over £360k

The people who benefit most are those on around £100-260k

.....but the very richest might well be set to benefit very significantly from the abolition of the LTA.

How exactly? As they can only put £10k a year in going forwards, and were restricted to £4k a year till now? Maybe they already piled in during 2006-2010 under the last Labour govt while the LTA was £1.8 million and AA was £250k and no taper? In which case they'd have probably used protections when the Tories reduced the LTA/AA and stopped payments to avoid further AA and LTA hammering.

This is completely useless for the very rich. It's very good for those on £100-260k

The"rich" have only been restricted to £4k pa since 2020, and £10k pa 2016-2020........in fact, someone contributing the full AA every year since it's introduction in 2006, and subject to the full AA taper since 2016,  would still have put in £1.457M in contributions alone - add in the growth and the "pot" would likely be over £3M today (and could be £4M+).......and that's just the last 17 years.

Interesting that of that £1.457M potential contributions since 2006, the vast majority of it (over £1M) would have to have been made in the 4 years of the previous Labour govt (2006-2010) when the AA was £250k+, rather than the 13 years under the coalition/Tories when the AA was cut to £50k then £40k then tapered. That just shows how generous pensions were to the rich under Labour!

But the point is, with growth etc a £3-4M pension would have been hammered by the LTA so unless they had a crystal ball and knew it would be abolished, no-one would have contributed at that level.

zagfles

peterg1965 said:

So, bit of a technical question on the maximum PCLS figure and how you are measured against it, with a combination of DB and DC pensions.

I am in the fortunate position of having a very good DB pension, which came into payment from 2015 when i was 49. It was measured against the LTA (then £1.25M) and I used 61.59% of LTA, with the calculation of 23 (20+3 Lump sum) x annual pension.  Since then I have crystalized part of a DC pension and used a further 23.76% (£266K) with a PCLS of £66K, a further crystallization of a DC pot with a £9870 PCLS (3.66%) (£39.7K).

So with a maximum allowable tax free PCLS of £268,275, i would be interested to find out how I am measured and tracked against how much tax free money i have used out of that figure.

I think the calculation would be  3 x annual pension from my DB - £99K + £66K and £9.9K from DC = £174.9K.  That would mean I have £93.4K left, so a further £374K pension savings available to achieve that figure.

If that is correct, then i am unlikely to reach that max PCLS figure, BUT if i did, I will have effectively will have had a pot of £1.44M to have been able to receive the £268275 max figure.  Does this make sense?

I guess the distortion is caused by a combination of DC and DB

In 2023/4 the max PCLS will be 25% of your remaining LTA. Same as now.

From April 2024 there'll be some other method to cap PCLS, it may follow the same sort of mechanism as the LTA or might be something different. They probably haven't decided and want to consult with pension providers how to implement it.