Budget 2023: Tax-free pension limits raised - here's what it means for your savings

pensionpawn

NoMore said:

sevenhills said:

MSE_Emily said:

The maximum annual tax-free amount you can save into a pension once you've taken money out of it will rise from £4,000 to £10,000 from 6 April.

So I could put my £18k SIPP into drawdown and take £4,500 tax free.
I could then reinvest up to £10k as I earn £17k per year? This would be workable in my last few years of employment.

If you only took the tax free cash you could put the whole 17k gross (13600 net) into your pension, as you wouldn't have triggered the MPAA.

When you do trigger MPAA through one pot, are you still able to take 25% tax free from other untouched pots?

zagfles

pensionpawn said:

NoMore said:

sevenhills said:

MSE_Emily said:

The maximum annual tax-free amount you can save into a pension once you've taken money out of it will rise from £4,000 to £10,000 from 6 April.

So I could put my £18k SIPP into drawdown and take £4,500 tax free.
I could then reinvest up to £10k as I earn £17k per year? This would be workable in my last few years of employment.

If you only took the tax free cash you could put the whole 17k gross (13600 net) into your pension, as you wouldn't have triggered the MPAA.

When you do trigger MPAA through one pot, are you still able to take 25% tax free from other untouched pots?

Of course. The MPAA restricts contributions, it has no effect on withdrawals or how they are taxed.

pensionpawn

zagfles said:

pensionpawn said:

NoMore said:

sevenhills said:

MSE_Emily said:

The maximum annual tax-free amount you can save into a pension once you've taken money out of it will rise from £4,000 to £10,000 from 6 April.

So I could put my £18k SIPP into drawdown and take £4,500 tax free.
I could then reinvest up to £10k as I earn £17k per year? This would be workable in my last few years of employment.

If you only took the tax free cash you could put the whole 17k gross (13600 net) into your pension, as you wouldn't have triggered the MPAA.

When you do trigger MPAA through one pot, are you still able to take 25% tax free from other untouched pots?

Of course. The MPAA restricts contributions, it has no effect on withdrawals or how they are taxed.

That's a relief (no pun intended...) It was just a nagging doubt in the back of my mind that resurfaced after the Budget. Though thinking it through, UFPLS is similar which suggests that it wouldn't be a problem, as that's repeated tax free / taxable withdrawals. 

Albermarle

Interestingly - according to Yougov, the public are completely divided over whether abolishing the LTA was a good idea or not, 37% for and 37% against

Although if you stopped the public in the street and asked them to explain what LTA actually was and how it worked, I suspect you would not get many informative answers.

Albermarle

pensionpawn said:

zagfles said:

pensionpawn said:

NoMore said:

sevenhills said:

MSE_Emily said:

The maximum annual tax-free amount you can save into a pension once you've taken money out of it will rise from £4,000 to £10,000 from 6 April.

So I could put my £18k SIPP into drawdown and take £4,500 tax free.
I could then reinvest up to £10k as I earn £17k per year? This would be workable in my last few years of employment.

If you only took the tax free cash you could put the whole 17k gross (13600 net) into your pension, as you wouldn't have triggered the MPAA.

When you do trigger MPAA through one pot, are you still able to take 25% tax free from other untouched pots?

Of course. The MPAA restricts contributions, it has no effect on withdrawals or how they are taxed.

That's a relief (no pun intended...) It was just a nagging doubt in the back of my mind that resurfaced after the Budget. Though thinking it through, UFPLS is similar which suggests that it wouldn't be a problem, as that's repeated tax free / taxable withdrawals. 

As a UFPLS withdrawal includes taxable income then it would trigger MPAA. 

Albermarle

zagfles said:

Albermarle said:

zagfles said:

Pat38493 said:

PensionSaverPeter said:

I wonder what will happen if Labour get in and do re-implement the LTA cap?  Would they set it back to £1,073,100 or perhaps higher?

Will those that have since paid in to their pension to take them above the re-implemented cap be given some protection on that amount so they don't again get hit with the punitive tax charges.  It seems a bit disingenuous to hit them when they've have topped up in good faith they they wouldn't get hit with the massive taxes.

I've just listened to an interview with the shadow chancellor where she seemed to imply that they would re-instate the LTA at the current level, and give "doctors" the same exception that judges have today (she was not pressed to further define what she meant by doctors).

Judges use an unregistered scheme. How are they going to do that retrospectively for doctors? It doesn't sound like they've thought it through, in fact how could they, it's only 2 days since the budget. It's knee-jerk political point scoring, not carefully considered policy. There's probably not going to be an election for 18 months, so I wouldn't worry about it yet, wait until the BMA and hopefully some of the few independant and financially aware journalists press them for exact details of their proposals.

I agree that it is probably not worth doing anything yet, or even thinking it about it too hard ( and getting a headache) . 

Chancellor springs totally unexpected policy in budget. Said Chancellor is perfectly aware what the Labour reaction will be.

Oh really? When the Labour shadow health secretary called for exactly that a few months ago?

https://www.theguardian.com/society/2022/sep/03/doctors-pensions-labour-would-abolish-cap-says-wes-streeting

Yeah, he was perfectly aware

The article only mentions Doctors pensions.

MK62

It was probably unwise of Mr Streeting to say this.......though he did appear to have been talking about Doctors pensions specifically, and didn't really give much detail........he didn't particularly like the idea though, also saying "I’m not pretending that doing away with the cap is a particularly progressive move. But it is one that sees patients seen faster, and will inevitably save lives. I’m just being hard-headed and pragmatic about this.”

In any case, comments to a newspaper from the Shadow Health Secretary hardly made it official Labour party policy..........

It was clear to most people that something needed to be done about the pension situation in the NHS.......some will agree with Mr Hunt's approach, and some won't.......but let's not forget that it was the Conservative governments who repeatedly slashed and froze the LTA, and cut and froze the AA, so creating the very problem in the first place.......

mlv-1967

This Tory pensions trick seems perfectly timed to set up a future Labour government with a difficult problem: how to recover the lost revenue without being seen to be punishing certain high earners (i.e. doctors). I don't share the semi-religious adulation that some people have for doctors and I don't see why they should be treated as a privileged class. The simplest way to prevent early retirement is simply to raise the minimum early retirement age from 55 to 60 - there is no need to give a huge tax break to a relatively small and wealthy sector of the working population. 
As for what Labour will do, I don't have much faith in them to do anything that makes any sense.

itsmeagain

zagfles said:

Grumpy_chap said:

Is there any uplift to the amount that can be contributed to a pension if no earned income?
The current £2,880 net, £3,600 gross contribution?
I can't see anything obvious in the media articles.

No. Why would you expect there to be, the whole reason for increasing the limits was to encourge people to stay in/return to work.

How will that encouragement help then?

The doctors that left years ago and the wealthy middle class that left up to 2 years ago with their £50kPA DB pension or protected £1.8b DC pots plus loads of other investments can now go back to work to top up their pension with £10k instead of £4k of their £200k salary, not being able to wave the MPAA to permit the new £60k PIA limit - brilliant!

I'm not convinced they'll be rushing back from their yachts & golf course. A late reaction - too little - too late - no foresight.

No point in dangling very small carrots to people that don't need to work.

Government needs to think again!

zagfles

Albermarle said:

zagfles said:

Albermarle said:

zagfles said:

Pat38493 said:

PensionSaverPeter said:

I wonder what will happen if Labour get in and do re-implement the LTA cap?  Would they set it back to £1,073,100 or perhaps higher?

Will those that have since paid in to their pension to take them above the re-implemented cap be given some protection on that amount so they don't again get hit with the punitive tax charges.  It seems a bit disingenuous to hit them when they've have topped up in good faith they they wouldn't get hit with the massive taxes.

I've just listened to an interview with the shadow chancellor where she seemed to imply that they would re-instate the LTA at the current level, and give "doctors" the same exception that judges have today (she was not pressed to further define what she meant by doctors).

Judges use an unregistered scheme. How are they going to do that retrospectively for doctors? It doesn't sound like they've thought it through, in fact how could they, it's only 2 days since the budget. It's knee-jerk political point scoring, not carefully considered policy. There's probably not going to be an election for 18 months, so I wouldn't worry about it yet, wait until the BMA and hopefully some of the few independant and financially aware journalists press them for exact details of their proposals.

I agree that it is probably not worth doing anything yet, or even thinking it about it too hard ( and getting a headache) . 

Chancellor springs totally unexpected policy in budget. Said Chancellor is perfectly aware what the Labour reaction will be.

Oh really? When the Labour shadow health secretary called for exactly that a few months ago?

https://www.theguardian.com/society/2022/sep/03/doctors-pensions-labour-would-abolish-cap-says-wes-streeting

Yeah, he was perfectly aware

The article only mentions Doctors pensions.

What "cap" do you think he was talking about?