yes!!!!!

bearshare

Am I missing something? Surely, if you build up a large pension, with HRT relief on the way in, then you will be paying HRT on most of it 'on the eay out'. (Ignoring company contributions). I.e. no benefit to paying in, beyond the - limited - tax free lump sum. 

dealyboy

Hi @hyubh ...

hyubh said:

zagfles said:

dunstonh said:

bostonerimus said:

Wonderful news if you have enough lifetime income to take advantage, but it will only increase wealth inequity. It's a nice gift for the best off and irrelevant to the majority of people.

The UK tax system has been punishing wealth generation for a while now.    

Do not forget that the super wealthy get their annual allowance tapered. So, they didn't get £40k before and wont get £60k now.   The most they could pay in is £4,000 and that is going upto £10,000.  

The changes to the pension allowances affect basic rate taxpayers through to the lower end of high earners (sub 250k a year)

Yes, the big winners are those on low 6 figure salaries, eg NHS consultants. There's nothing of any benefit to those at the very top end, eg pro footballers and overpaid pundits on 7 figure salaries, they won't even be able to put 1% of their salary into a pension without being hit by an AA charge.

If doctors worked in a free market environment like professional footballers, I'm pretty sure they wouldn't be enjoying the levels of DB entitlement that (in combination with their high rates of pay) caused their recent LTA issues in the first place...

... Well said ... and who pays for their public sector pension schemes ? we the private sector workers who pay/paid taxes on a tenth of their salaries working 10x as hard ... and I always thought naively that those who went into the NHS or teaching were following a vocation for the benefit of society rather than themselves.

Scot_39

fizio said:

Malthusian said:

fizio said:

What about those already having use 100% LTA? Can they start a new pension - though the 25% tax-free makes it less attractive

They can certainly start a new pension (they could before). Even with 100% of the pension fund subject to income tax, it could be attractive depending on the tax relief in vs. tax out equation. 
It will be interesting to see the detail and how this effects people who fully crystallised with an LTA of £1 million. Will we have to declare how much PCLS we've taken rather than how much LTA we've used?

True - if tax relief in is same as tax out then I'm not sure there is any point (for me anyway) of taking advantage of the MPAA going from 4 to 10k..

25% tax free ?

To me the 40% relief - when option presented itself - was always a bit of a "no brainer" - changing the 20% contributions less so.  But for me that 40% only occured from abormally high overtime when younger.  So did boost my contributions one in every few years - just to avoid higher rate tax.

Hoping to get that out at 20% - and with 25% lump sum - even 20% has some merit.

When LTA came in never even thought about it - but my IFA did when chatting about other issue - after it dropped to £1m.

Cus

bearshare said:

Am I missing something? Surely, if you build up a large pension, with HRT relief on the way in, then you will be paying HRT on most of it 'on the eay out'. (Ignoring company contributions). I.e. no benefit to paying in, beyond the - limited - tax free lump sum. 

You can take approx £67k a year income from your pension without moving to the higher tax band. (Combination of personal allowance and 25%tax free in that).
To extract £67k a year you could argue that at a 4% withdrawal rate that's a pot of £1.675mn built up, which is likely done with hrt on the way in.

bearshare

Cus said:

bearshare said:

Am I missing something? Surely, if you build up a large pension, with HRT relief on the way in, then you will be paying HRT on most of it 'on the eay out'. (Ignoring company contributions). I.e. no benefit to paying in, beyond the - limited - tax free lump sum. 

You can take approx £67k a year income from your pension without moving to the higher tax band. (Combination of personal allowance and 25%tax free in that).
To extract £67k a year you could argue that at a 4% withdrawal rate that's a pot of £1.675mn built up, which is likely done with hrt on the way in.

You will not get 25% tax free anymore. It is limited to £260k-ish

kinger101

bearshare said:

Am I missing something? Surely, if you build up a large pension, with HRT relief on the way in, then you will be paying HRT on most of it 'on the eay out'. (Ignoring company contributions). I.e. no benefit to paying in, beyond the - limited - tax free lump sum. 

Well, you'd unlikely be paying HRT on a pot of £1,073,000 if you wanted it to last.  Most people would probably retire by the time the uncapped LTA reached levels where their drawdown or annuity exposed them to HRT, but that number is much higher than the current limit.

hugheskevi

bearshare said:

Am I missing something? Surely, if you build up a large pension, with HRT relief on the way in, then you will be paying HRT on most of it 'on the eay out'. (Ignoring company contributions). I.e. no benefit to paying in, beyond the - limited - tax free lump sum. 

There are quite a few scenarios where you gain even paying 40% income tax on withdrawal of funds and ignoring occupational pension:

• You make contributions from salary which would be taxed at 45% income tax rate
• You make a contribution from salary which would have caused Personal Allowance withdrawal (60% marginal rate of income tax)
• You make contributions using salary sacrifice (especially if employer refunds employer saving)
• More favourable inheritance tax treatment than unwrapped funds

Cus

bearshare said:

Cus said:

bearshare said:

Am I missing something? Surely, if you build up a large pension, with HRT relief on the way in, then you will be paying HRT on most of it 'on the eay out'. (Ignoring company contributions). I.e. no benefit to paying in, beyond the - limited - tax free lump sum. 

You can take approx £67k a year income from your pension without moving to the higher tax band. (Combination of personal allowance and 25%tax free in that).
To extract £67k a year you could argue that at a 4% withdrawal rate that's a pot of £1.675mn built up, which is likely done with hrt on the way in.

You will not get 25% tax free anymore. It is limited to £250k-ish

Always was limited, so you still get some tax free. Then there is the theory that a lot of hrt payers in employment will be brt in retirement etc etc and it's still worth it overall

bearshare

kinger101 said:

bearshare said:

Am I missing something? Surely, if you build up a large pension, with HRT relief on the way in, then you will be paying HRT on most of it 'on the eay out'. (Ignoring company contributions). I.e. no benefit to paying in, beyond the - limited - tax free lump sum. 

Well, you'd unlikely be paying HRT on a pot of £1,073,000 if you wanted it to last.  Most people would probably retire by the time the uncapped LTA reached levels where their drawdown or annuity exposed them to HRT, but that number is much higher than the current limit.

'Most people' (OK, me) will also have a state pension, and possibly some DB pension(s), that take a chunk out of the personal,allowance available.  But really I was talking about pensions over e.g.£1.8m (the supposed LTA  that was going to be introduced) or there abouts.

bearshare

hugheskevi said:

bearshare said:

Am I missing something? Surely, if you build up a large pension, with HRT relief on the way in, then you will be paying HRT on most of it 'on the eay out'. (Ignoring company contributions). I.e. no benefit to paying in, beyond the - limited - tax free lump sum. 

There are quite a few scenarios where you gain even paying 40% income tax on withdrawal of funds and ignoring occupational pension:

• You make contributions from salary which would be taxed at 45% income tax rate
• You make a contribution from salary which would have caused Personal Allowance withdrawal (60% marginal rate of income tax)
• You make contributions using salary sacrifice (especially if employer refunds employer saving)
• More favourable inheritance tax treatment than unwrapped funds

Certainly the last point, for now.