LTA abolition from 2024

Sunnylifeover50plan

@Sea_Shell I agree. Personally spousal/ civil partner exemption seems fair. It's not particularly clear where the truth lies though - as others mention it might take an industry expert to present a view and test the actual position.

zagfles

Sea_Shell said:

Is it going to be an all or nothing cliff edge (the under 75 thing)?

So you could currently have a couple drawing up to their PA each, so have an income of ~£25k, and if one of them died early, then they could maintain their income without any additional tax.

But under the proposed changes, the widow would only have their own PA, and so would have to pay tax on anything above that (excluding any TFLS)

Why not have, at least, the ability to inherit your spouses PA limit, like an enhanced Marriage Allowance???    That seems fairer, so at least let a widow maintain their income stream at the same amount of tax paid than if they had not been widowed.   

Am I understanding it right, and who agrees with me? 

No chance! At the moment a couple where one has no income eg a stay at home parent can't even use their PA against the earner's income (apart from 10% of it - and that will almost certainly be abolished if Labour win the election).

So you could have a widow living alone with a £25k PA all to herself and a family of 4 next door with a single earner, with just one usable £12.5k PA between them!

Sea_Shell

zagfles said:

Sea_Shell said:

Is it going to be an all or nothing cliff edge (the under 75 thing)?

So you could currently have a couple drawing up to their PA each, so have an income of ~£25k, and if one of them died early, then they could maintain their income without any additional tax.

But under the proposed changes, the widow would only have their own PA, and so would have to pay tax on anything above that (excluding any TFLS)

Why not have, at least, the ability to inherit your spouses PA limit, like an enhanced Marriage Allowance???    That seems fairer, so at least let a widow maintain their income stream at the same amount of tax paid than if they had not been widowed.   

Am I understanding it right, and who agrees with me? 

No chance! At the moment a couple where one has no income eg a stay at home parent can't even use their PA against the earner's income (apart from 10% of it - and that will almost certainly be abolished if Labour win the election).

So you could have a widow living alone with a £25k PA all to herself and a family of 4 next door with a single earner, with just one usable £12.5k PA between them!

I was also thinking it could be used as an interim deal, rather than a cliff edge, to allow people to maybe change their retirement plans in light of any new rules.

So enable a transfer of PA for say 10 years after death, after which it reverts back?

zagfles

Sea_Shell said:

zagfles said:

Sea_Shell said:

Is it going to be an all or nothing cliff edge (the under 75 thing)?

So you could currently have a couple drawing up to their PA each, so have an income of ~£25k, and if one of them died early, then they could maintain their income without any additional tax.

But under the proposed changes, the widow would only have their own PA, and so would have to pay tax on anything above that (excluding any TFLS)

Why not have, at least, the ability to inherit your spouses PA limit, like an enhanced Marriage Allowance???    That seems fairer, so at least let a widow maintain their income stream at the same amount of tax paid than if they had not been widowed.   

Am I understanding it right, and who agrees with me? 

No chance! At the moment a couple where one has no income eg a stay at home parent can't even use their PA against the earner's income (apart from 10% of it - and that will almost certainly be abolished if Labour win the election).

So you could have a widow living alone with a £25k PA all to herself and a family of 4 next door with a single earner, with just one usable £12.5k PA between them!

I was also thinking it could be used as an interim deal, rather than a cliff edge, to allow people to maybe change their retirement plans in light of any new rules.

So enable a transfer of PA for say 10 years after death, after which it reverts back?

Wouldn't have thought the new rules would change many peoples' retirement plans, after all a pension within the current LTA could still be inherited completely tax free on death under 75, the only difference is it has to be taken as a lump sum. So tax would only be paid on interest/growth, and interest within the starting rate/PSA would be tax free, and could use CGT allowances, so the widow/widower could probably have an income of £20k+ before paying any tax.

zagfles

Few more press articles on this:

https://www.pensionsage.com/pa/Concerns-raised-over-dissapointing-lta-proposals-as-experts-warn-of-detrimental-outcomes.php

https://www.wtwco.com/en-gb/insights/2023/07/uk-pensions-tax-regime-from-2024-25-not-quite-as-expected

https://www.ft.com/content/4083b1ba-7b12-455e-a695-0b3ac08530ae

Aged

Most of this is above my head, but I inherited a pension from my late spouse about 8 years ago and it passed to me free of tax as spouse was under 75 at date of death. Can anyone confirm please if this proposed change will affect me?

zagfles

Aged said:

Most of this is above my head, but I inherited a pension from my late spouse about 8 years ago and it passed to me free of tax as spouse was under 75 at date of death. Can anyone confirm please if this proposed change will affect me?

Nobody knows as it's just a paragraph in the policy document, but I think it's highly unlikely that they'll make it retrospective. It might affect your ability to pass it on as a tax free pension to anyone else.

Pat38493

The other question is, has anyone who was actually involved in drafting this, confirmed that the way it's being interpreted is actually what they intend?

Sunnylifeover50plan

Pat38493 said:

The other question is, has anyone who was actually involved in drafting this, confirmed that the way it's being interpreted is actually what they intend?

That's the question. I get that the UK government spent a lot of money over the last few years but it feels like Hunt and Rishi are intent on getting blood from the stone.