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

JoeCrystal

Frankly, I really don't see any point on discussing in any great details on what the future parties or governments will be doing. One have to go along whatever they decided to do with the pensions legislations anyway and have to plan for the current pension regimes (with an eye to assuming worse case regarding the state pension age).

zagfles

MK62 said:

I doubt many "ordinary" people wanted the LTA abolished, whilst at the same time having their personal allowance frozen for five years...

Evenly split according to YouGov:

https://yougov.co.uk/topics/politics/articles-reports/2023/03/16/britons-are-divided-31-33-over-whether-jeremy-hunt

I suspect most "ordinary" people would prefer the PA frozen at £12570 for 5 years rather than if the coalition/Tories had just indexed it since 2010, it would be £9335 now, and even if inflation averages 6% over the next 5 years it'd still be under £12570.

OTOH I suspect most people who've blown the current LTA would much prefer it if they'd indexed linked the LTA since 2010 rather than abolish it but capping the PCLS at 25% of current LTA ie £268k. The LTA would be £2.6 million now, so a max PCLS of £650k!

zagfles

JoeCrystal said:

Frankly, I really don't see any point on discussing in any great details on what the future parties or governments will be doing. One have to go along whatever they decided to do with the pensions legislations anyway and have to plan for the current pension regimes (with an eye to assuming worse case regarding the state pension age).

It's all speculation but not really any different to discussions about investment strategies, safe withdrawal rates etc, they are attempts to plan now based on speculation of how things might go in the future, whether that's investment returns or govt tax policy etc. As with investments, what happened in the past is usually the starting point.

So a discussion about the likelyhood, technicalities, or how to mitigate future adverse tax policy is as valid as discussion on how to mitigate a stockmarket downturn, rampant inflation etc. You don't know if/when/how they'll happen but it's worth discussing the likelyhood, technicalities and what you could do to mitigate them.

Albermarle

zagfles said:

MK62 said:

I doubt many "ordinary" people wanted the LTA abolished, whilst at the same time having their personal allowance frozen for five years...

Evenly split according to YouGov:

https://yougov.co.uk/topics/politics/articles-reports/2023/03/16/britons-are-divided-31-33-over-whether-jeremy-hunt

I suspect most "ordinary" people would prefer the PA frozen at £12570 for 5 years rather than if the coalition/Tories had just indexed it since 2010, it would be £9335 now, and even if inflation averages 6% over the next 5 years it'd still be under £12570.

OTOH I suspect most people who've blown the current LTA would much prefer it if they'd indexed linked the LTA since 2010 rather than abolish it but capping the PCLS at 25% of current LTA ie £268k. The LTA would be £2.6 million now, so a max PCLS of £650k!

 I would have been happier for the £1.073M limit to just have gone up by inflation this year. More tax free cash available, and probably less of a threat that IHT exemption might disappear/reduce/changed.
Obviously though it depends on exactly how far over the LTA limit you were likely to be, and a 10% rise would probably not have helped much with the NHS Doctors issue.

MK62

zagfles said:

MK62 said:

I doubt many "ordinary" people wanted the LTA abolished, whilst at the same time having their personal allowance frozen for five years...

I suspect most "ordinary" people would prefer the PA frozen at £12570 for 5 years rather than if the coalition/Tories had just indexed it since 2010, it would be £9335 now, and even if inflation averages 6% over the next 5 years it'd still be under £12570.

......if you use CPI, but anyway it's just a single aspect of the overall picture. Perhaps you've forgotten who raised VAT to 20%, for instance, as well as the myriad of other tax rises......the PA is just the most familiar example of Sunak/Hunt stealth tax rises.....the IFS have stated we now have the biggest tax burden since the 50s. Now, fair enough, it's not all down the the government - Covid (no matter what anyone's opinion is of how it was handled) has thrown a big spanner in the works......£400B of extra spending has to be accounted for somehow.......but increasing taxes at the lower end while giving away large tax breaks at the other doesn't seem to me to be the fairest way of going about it.

As for that poll on the LTA, I'm very surprised that 74% of a representative cross section of the British public knew what the LTA is/was, and whether it was a good or bad idea to abolish it........I wonder how many simply voted on party lines......of the people I've spoken to, I can honestly say it's a lot less than 74%, but hey-ho, as they say.......

zagfles

MK62 said:

zagfles said:

MK62 said:

I doubt many "ordinary" people wanted the LTA abolished, whilst at the same time having their personal allowance frozen for five years...

I suspect most "ordinary" people would prefer the PA frozen at £12570 for 5 years rather than if the coalition/Tories had just indexed it since 2010, it would be £9335 now, and even if inflation averages 6% over the next 5 years it'd still be under £12570.

As for that poll on the LTA, I'm very surprised that 74% of a representative cross section of the British public knew what the LTA is/was, and whether it was a good or bad idea to abolish it........I wonder how many simply voted on party lines......of the people I've spoken to, I can honestly say it's a lot less than 74%, but hey-ho, as they say.......

That's the thing - at a time when Labour have a strong lead in the polls, if it was a party line thing you'd expect a similar lead on something like this, or even more as the Lib Dems, SNP etc probably oppose it. But it seems far more people support the LTA abolition than support the Tories!

People might not understand the LTA but they can understand a "pension cap" or "the total amount people can save tax-free in their pensions" as in the question.

BTW although this might seem like it's straying into being purely political, I think this point is relevant to pension planning, because the popularity or otherwise of the policy could well influence the likelyhood of Labour reversing it should they win - clearly they're trying to make political capital out of it but if they can see that's not working they could quietly drop it. Or do something else instead (for instance the inheritance issues mentioned earlier).

MK62

Well, if it is actually 50-50 (if you discount the don't knows), then it's neither a net vote winner nor loser.....

As to what they'll do....IF they get into power with a majority.....I'd be very surprised if it's a straight reintroduction of the LTA as is.....Labour have acknowledged that there are issues with that.....but as to what they'll actually do.....who knows?......though now the LTA is no more, they'd have options (and a clean slate for another political football with LTA2 - The Return..... )

zagfles

MK62 said:

Well, if it is actually 50-50 (if you discount the don't knows), then it's neither a net vote winner nor loser.....

As to what they'll do....IF they get into power with a majority.....I'd be very surprised if it's a straight reintroduction of the LTA as is.....Labour have acknowledged that there are issues with that.....but as to what they'll actually do.....who knows?......though now the LTA is no more, they'd have options (and a clean slate for another political football with LTA2 - The Return..... )

No, that assumes they're level to start with. Tories are behind Labour in the polls, so anything that the public are 50/50 about is a vote winner for the Tories because it means the policy is more popular than they are. It must mean non Tory voters like the policy.

Obviously the extent depends how much the public care about this issue, but if they don't care that's another reason not to try to make a political football out of it and concentrate on what people do actually care about. I suspect they'll go quiet about it. Or as you say will return in a different form - like some others I suspect they'll tackle the inheritance issue

MK62

It depends on how you interpret this data......for instance, 48% of Conservative voters polled supported the abolition......while 48% of Labour voters opposed it.....the key is those who either don't know or support(ed) other parties. Further, there is nothing in that poll to indicate whether the LTA issue, on it's own, will have any effect on future voting intentions....
In the end, the next election will be decided in the marginal seats....not by any small, supposedly representative, opinion polls........personally I really can't see the LTA issue alone being much of a vote swinger either way - we might see it as a big issue, but I very much doubt the general public will see it that way in the grand scheme.........we'll have to wait and see though - 18 months or so is a long time in politics so who knows what the political landscape will look like then. As it stands now, it appears Labour would win any general election with a landslide......but such a position isn't uncommon mid term. I suspect the current gap in the "polls" will close as the next election looms......it could well be that there will be no outright winner - and what happens then to LTA2 is anyone's guess......

Given the pension landscape Mr Hunt has now created, it's not inconceivable that the Conservatives, should they win the next election, will themselves take action on this issue.....😉

RogerPensionGuy

A few similarly age position  pension friends are looking towards activating pension events just after the 6th of April 2024.

General feelings are if activating big pots over the current LTA in these next few months and years, doing it next April could be the best time because of the LTA process. 

Any views most welcome please?