Consequences if the Pension LTA tax is re-introduced by Labour?

zagfles

bonnyrigger said:

A compromise will be worked out no doubt, they won't take it down to where it was and hopefully add some indexation to take away the squabbling.
A bit rich to criticise Rayner from the paper that supported Truss and Brexit.

The paper just reported it - it was financial experts that ridiculed them. Not that you need to be an expert to know that pensions are invested and investments are expected to grow...

Would like them to restore CPI increases to tax allowances and bandings, 5 or 6 years at 12570 is a bad joke.

Maybe they'll restore it to the same real terms level as it was under the last Labour govt. The PA was £6475 in 2010, that'd be £9335 today if CPI indexed.

tiring33

vincit_veritas said:

Could Labour use the values originally recorded during the now defunct LTA crystallization events (BCE 1 to 4) or would that be regarded as "retrospective" taxation? 

As others have said 'they could do anything', but it does seem unlikely (to me at least) that any new Government would re-introduce the LTA in a way that would apply a charge to funds that have previously been crystallised (via BCE1-4 etc) under the current rules. If all or part of your pension funds have passed through any of these LTA/BCE tests and these funds still sit in your pension in drawdown, would they really ask you to pass these funds through the tests again and potentially pay an LTA charge on them? I just don't think that's likely.

Even if you go into drawdown and crystallise funds this year, paying a 0% LTA charge on funds in excess of the LTA, I can't believe they would reintroduce the LTA in a way that would make you do the test again on these funds, just because they disagreed with the 0% rate. Having said that, if they have a significant parliamentary majority they have the power to do anything they want, hopefully we will see more details from them as we get closer to the next election.

Grumpy_chap

zagfles said:

But now Labour apparently agree with the Tories reduction in the LTA, as they want to restore it at the level the Tories reduced it to, not the level Labour left it at! Because it'd take the average worker "400 years" to get to the LTA according to their deputy leader 

I have not seen / read / heard that comment elsewhere so responding on what is written in that post.

The biggest takeaway I get from that is how great the NHS will be under this scheme - the important omission is whether the retirement age will increase to match the new life-expectancy or whether it will remain in the high-60's range

I assume the "400 years" was along the lines of £1m / 400 = £2.5k per year, then multiply that through the 8% auto-enrolment contribution level, and it results in a salary around £31k which is, presumably, the "average worker" referenced. 
Seems to have ignored the amount below which auto-enrolment contributions are not applied, I think about another £6k, so that would mean the "average worker" salary around £37k.
Also, ignored the fact that the "average worker" makes contributions greater than the auto-enrolment thresholds.
And, most significantly, failed to consider that the pension contributions will benefit from growth between contribution and draw-down.

Seems like a total failure to understand how pensions work.

Albermarle

Grumpy_chap said:

zagfles said:

But now Labour apparently agree with the Tories reduction in the LTA, as they want to restore it at the level the Tories reduced it to, not the level Labour left it at! Because it'd take the average worker "400 years" to get to the LTA according to their deputy leader 

I have not seen / read / heard that comment elsewhere so responding on what is written in that post.

The biggest takeaway I get from that is how great the NHS will be under this scheme - the important omission is whether the retirement age will increase to match the new life-expectancy or whether it will remain in the high-60's range

I assume the "400 years" was along the lines of £1m / 400 = £2.5k per year, then multiply that through the 8% auto-enrolment contribution level, and it results in a salary around £31k which is, presumably, the "average worker" referenced. 
Seems to have ignored the amount below which auto-enrolment contributions are not applied, I think about another £6k, so that would mean the "average worker" salary around £37k.
Also, ignored the fact that the "average worker" makes contributions greater than the auto-enrolment thresholds.
And, most significantly, failed to consider that the pension contributions will benefit from growth between contribution and draw-down.

Seems like a total failure to understand how pensions work.

Or maybe she was deliberately twisting statistics/facts on a subject most of the public is clueless about, to press home a message that might win votes.

 Something all politicians do on a daily ( hourly ?) basis.............

Grumpy_chap

Albermarle said:

Or maybe she was deliberately twisting statistics/facts to press home a message that might win votes.

OH - so you mean I might still die before I reach the age of 400

Daniel54

I can’t read the Telegraph article,but usually these days that doesn’t matter

In any case,ignore Rayner .The key person is Rachel Reeves who is a very bright bunny.Oxford and MSc in economics  from LSE ,followed by working at BoE  and HBOS.Successfully led the 2011 opposition to the originally proposed maximum 2 year increase in state pension age under the 2011 act.Shadowed the DWP brief subsequently

I don’t see her doing or authorising anything stupid around occupational pensions or the state pension.

Removing or capping the IHT free element of DC pensions would be more effective financially and politically than messing around with the lifetime allowance.In my view,it would also be easily justified.

.

zagfles

Daniel54 said:

I can’t read the Telegraph article,but usually these days that doesn’t matter

In any case,ignore Rayner .The key person is Rachel Reeves who is a very bright bunny.Oxford and MSc in economics  from LSE ,followed by working at BoE  and HBOS.

Similar to Liz Truss then (PPE Oxford, economic director at C&W). Very reassuring

Removing or capping the IHT free element of DC pensions would be more effective financially and politically than messing around with the lifetime allowance.In my view,it would also be easily justified.

It would. As such, it's not their (current) policy.

Albermarle

Removing or capping the IHT free element of DC pensions would be more effective financially and politically than messing around with the lifetime allowance.In my view,it would also be easily justified.

Such as removing the blanket exemption and having a new nil rate band for pension pots, set at < £500K .

Will be some technical difficulties around trust law, but I would not be surprised to see something like that. Better get spending !

zagfles

Grumpy_chap said:

Albermarle said:

Or maybe she was deliberately twisting statistics/facts to press home a message that might win votes.

OH - so you mean I might still die before I reach the age of 400

Not if you ignore growth (in age)

zagfles

Albermarle said:

Removing or capping the IHT free element of DC pensions would be more effective financially and politically than messing around with the lifetime allowance.In my view,it would also be easily justified.

Such as removing the blanket exemption and having a new nil rate band for pension pots, set at < £500K .

Will be some technical difficulties around trust law, but I would not be surprised to see something like that. Better get spending !

Or just make all inherited pensions subject to income tax, as they are for dependants DB, or DC on death over 75.