Should I take Tax Free Lump Sum in case they change the rules?

RogerPensionGuy

MetaPhysical said:

I am going to go against the grain here and I think that a government could and possibly will reduce that £268k tax free cash sum and they may even have the nerve to do it retrospectively from the date of an election victory.  People able to take out such vast sums free of tax are a very soft and easy target for the government to rake in money from.  No one will shed a tear for these people and, indeed, could even be popular with the general electorate to rake in those "scoundrels with all that money".  I know I may get downvoted for this but I think this is very possible.  A government with a huge majority and four to five years out from an election can essentially do what it wants and I foresee that with a labour administration.
  
I also think the LTA will be brought back but maybe at a more realistic £2million.

I am thinking I am going to take the TFLS from my pension in case there is a change and it gets subjected to tapering in some way. 

MetaPhysical said:

I am going to go against the grain here and I think that a government could and possibly will reduce that £268k tax free cash sum and they may even have the nerve to do it retrospectively from the date of an election victory.  People able to take out such vast sums free of tax are a very soft and easy target for the government to rake in money from.  No one will shed a tear for these people and, indeed, could even be popular with the general electorate to rake in those "scoundrels with all that money".  I know I may get downvoted for this but I think this is very possible.  A government with a huge majority and four to five years out from an election can essentially do what it wants and I foresee that with a labour administration.
  
I also think the LTA will be brought back but maybe at a more realistic £2million.

I am thinking I am going to take the TFLS from my pension in case there is a change and it gets subjected to tapering in some way. 

If they retrospectively lowered that 268K TFLS figure without protections, it would cause many many too much problems in so many ways, therefore it appears very most unlikely to me.

Reference the LTA, it might possibly be reintroduced in a few years time as bringing it back sooner would again cause too many issues, maybe it will be renamed modeled and return after 2 or 3 years at yes, it would need to be 2M minimum today and 2.5M by 2030.

But, pensions football is very unpredictable with the UK government. 

Hoenir

MetaPhysical said:

I am going to go against the grain here and I think that a government could and possibly will reduce that £268k tax free cash sum and they may even have the nerve to do it retrospectively from the date of an election victory.  People able to take out such vast sums free of tax are a very soft and easy target for the government to rake in money from.  No one will shed a tear for these people and, indeed, could even be popular with the general electorate to rake in those "scoundrels with all that money".  I know I may get downvoted for this but I think this is very possible.  A government with a huge majority and four to five years out from an election can essentially do what it wants and I foresee that with a labour administration.
  
I also think the LTA will be brought back but maybe at a more realistic £2million.

I am thinking I am going to take the TFLS from my pension in case there is a change and it gets subjected to tapering in some way. 

The number impacted is very very small. A high % also work in the public sector and it's their DB scheme which is impacted. While of interest on social media. Not a topic that's high up on the wider agenda I'd suggest. Other than when the media have little else to comment on. 

Albermarle

Reference the LTA, it might possibly be reintroduced in a few years time as bringing it back sooner would again cause too many issues, maybe it will be renamed modeled and return after 2 or 3 years at yes, it would need to be 2M minimum today and 2.5M by 2030.

It would only 'need' to be those figures to be seen to be fair in the eyes of the small % of people affected. 

In reality it could be any figure plucked out of mid air and the large majority of people ( voters) would not care less, or even register it as an issue.

LHW99

Hoenir said:

MetaPhysical said:

I am going to go against the grain here and I think that a government could and possibly will reduce that £268k tax free cash sum and they may even have the nerve to do it retrospectively from the date of an election victory.  People able to take out such vast sums free of tax are a very soft and easy target for the government to rake in money from.  No one will shed a tear for these people and, indeed, could even be popular with the general electorate to rake in those "scoundrels with all that money".  I know I may get downvoted for this but I think this is very possible.  A government with a huge majority and four to five years out from an election can essentially do what it wants and I foresee that with a labour administration.
  
I also think the LTA will be brought back but maybe at a more realistic £2million.

I am thinking I am going to take the TFLS from my pension in case there is a change and it gets subjected to tapering in some way. 

The number impacted is very very small. A high % also work in the public sector and it's their DB scheme which is impacted. While of interest on social media. Not a topic that's high up on the wider agenda I'd suggest. Other than when the media have little else to comment on. 

If that £268k remains frozen, as seems likely, it will reduce in value quite quickly in the current rate of inflation, so there would probably be little reason for future Governments to actually reduce the number of £.

Pat38493

LHW99 said:

Hoenir said:

MetaPhysical said:

I am going to go against the grain here and I think that a government could and possibly will reduce that £268k tax free cash sum and they may even have the nerve to do it retrospectively from the date of an election victory.  People able to take out such vast sums free of tax are a very soft and easy target for the government to rake in money from.  No one will shed a tear for these people and, indeed, could even be popular with the general electorate to rake in those "scoundrels with all that money".  I know I may get downvoted for this but I think this is very possible.  A government with a huge majority and four to five years out from an election can essentially do what it wants and I foresee that with a labour administration.
  
I also think the LTA will be brought back but maybe at a more realistic £2million.

I am thinking I am going to take the TFLS from my pension in case there is a change and it gets subjected to tapering in some way. 

The number impacted is very very small. A high % also work in the public sector and it's their DB scheme which is impacted. While of interest on social media. Not a topic that's high up on the wider agenda I'd suggest. Other than when the media have little else to comment on. 

If that £268k remains frozen, as seems likely, it will reduce in value quite quickly in the current rate of inflation, so there would probably be little reason for future Governments to actually reduce the number of £.

Indeed - fiscal drag of all types and forms is the preferred tool of this government (and I suspect the alternate party given that they are not screaming about it all the time) to increase taxes, on the basis that a good portion of the UK population is too bad at maths to figure out that they are getting done over just the same as they would if the headline tax rate went up.  It's a sign of our prime ministers lack of political skill that he wants to improve the maths skills of the population - they might then figure it out!

Unfortunately nobody seems interested in discussing whether fiscal drag is the fairest way to raise the money - it's just done because they know that it doesn't generate as much bad publicity.

zagfles

Pat38493 said:

LHW99 said:

Hoenir said:

MetaPhysical said:

I am going to go against the grain here and I think that a government could and possibly will reduce that £268k tax free cash sum and they may even have the nerve to do it retrospectively from the date of an election victory.  People able to take out such vast sums free of tax are a very soft and easy target for the government to rake in money from.  No one will shed a tear for these people and, indeed, could even be popular with the general electorate to rake in those "scoundrels with all that money".  I know I may get downvoted for this but I think this is very possible.  A government with a huge majority and four to five years out from an election can essentially do what it wants and I foresee that with a labour administration.
  
I also think the LTA will be brought back but maybe at a more realistic £2million.

I am thinking I am going to take the TFLS from my pension in case there is a change and it gets subjected to tapering in some way. 

The number impacted is very very small. A high % also work in the public sector and it's their DB scheme which is impacted. While of interest on social media. Not a topic that's high up on the wider agenda I'd suggest. Other than when the media have little else to comment on. 

If that £268k remains frozen, as seems likely, it will reduce in value quite quickly in the current rate of inflation, so there would probably be little reason for future Governments to actually reduce the number of £.

Indeed - fiscal drag of all types and forms is the preferred tool of this government (and I suspect the alternate party given that they are not screaming about it all the time) to increase taxes, on the basis that a good portion of the UK population is too bad at maths to figure out that they are getting done over just the same as they would if the headline tax rate went up.  It's a sign of our prime ministers lack of political skill that he wants to improve the maths skills of the population - they might then figure it out!

Unfortunately nobody seems interested in discussing whether fiscal drag is the fairest way to raise the money - it's just done because they know that it doesn't generate as much bad publicity.

It's worrying that even amongst MSE regulars who understand most finance issues well, many don't seem to understand inflation, as several threads here have proved.

hugheskevi

Hoenir said:

MetaPhysical said:

I am going to go against the grain here and I think that a government could and possibly will reduce that £268k tax free cash sum and they may even have the nerve to do it retrospectively from the date of an election victory.  People able to take out such vast sums free of tax are a very soft and easy target for the government to rake in money from.  No one will shed a tear for these people and, indeed, could even be popular with the general electorate to rake in those "scoundrels with all that money".  I know I may get downvoted for this but I think this is very possible.  A government with a huge majority and four to five years out from an election can essentially do what it wants and I foresee that with a labour administration.
  
I also think the LTA will be brought back but maybe at a more realistic £2million.

I am thinking I am going to take the TFLS from my pension in case there is a change and it gets subjected to tapering in some way. 

The number impacted is very very small. A high % also work in the public sector and it's their DB scheme which is impacted. While of interest on social media. Not a topic that's high up on the wider agenda I'd suggest. Other than when the media have little else to comment on. 

It is worth recalling that in the public sector DB schemes, tax free lump sums have effectively been abolished for many years, due to the use of a 12:1 commutation rate.

The LTA affects public sector scheme members adversely, but a lowering of the tax free limit would have very limited financial consequences as even for a higher rate taxpayer in retirement a 12:1 commutation rate is not particularly attractive.

zagfles

hugheskevi said:

Hoenir said:

MetaPhysical said:

I am going to go against the grain here and I think that a government could and possibly will reduce that £268k tax free cash sum and they may even have the nerve to do it retrospectively from the date of an election victory.  People able to take out such vast sums free of tax are a very soft and easy target for the government to rake in money from.  No one will shed a tear for these people and, indeed, could even be popular with the general electorate to rake in those "scoundrels with all that money".  I know I may get downvoted for this but I think this is very possible.  A government with a huge majority and four to five years out from an election can essentially do what it wants and I foresee that with a labour administration.
  
I also think the LTA will be brought back but maybe at a more realistic £2million.

I am thinking I am going to take the TFLS from my pension in case there is a change and it gets subjected to tapering in some way. 

The number impacted is very very small. A high % also work in the public sector and it's their DB scheme which is impacted. While of interest on social media. Not a topic that's high up on the wider agenda I'd suggest. Other than when the media have little else to comment on. 

It is worth recalling that in the public sector DB schemes, tax free lump sums have effectively been abolished for many years, due to the use of a 12:1 commutation rate.

The LTA affects public sector scheme members adversely, but a lowering of the tax free limit would have very limited financial consequences as even for a higher rate taxpayer in retirement a 12:1 commutation rate is not particularly attractive.

But they could use a linked AVC for the tax free lump sum.

Also under the new rules from April 2024 it would appear that if no tax free lump sum is taken from a DB pension then it doesn't use up the new lump sum allowance, so for instance someone could take a £50k pa DB pension with no PCLS and still have the full £268k available to take from another pension (although I think it would still be max 25% from an unlinked pension, but it's all a bit vague at the moment).

https://www.gov.uk/government/publications/abolition-of-the-lifetime-allowance-from-6-april-2024/abolition-of-the-lifetime-allowance-lta

Pat38493

hugheskevi said:

Hoenir said:

MetaPhysical said:

I am going to go against the grain here and I think that a government could and possibly will reduce that £268k tax free cash sum and they may even have the nerve to do it retrospectively from the date of an election victory.  People able to take out such vast sums free of tax are a very soft and easy target for the government to rake in money from.  No one will shed a tear for these people and, indeed, could even be popular with the general electorate to rake in those "scoundrels with all that money".  I know I may get downvoted for this but I think this is very possible.  A government with a huge majority and four to five years out from an election can essentially do what it wants and I foresee that with a labour administration.
  
I also think the LTA will be brought back but maybe at a more realistic £2million.

I am thinking I am going to take the TFLS from my pension in case there is a change and it gets subjected to tapering in some way. 

The number impacted is very very small. A high % also work in the public sector and it's their DB scheme which is impacted. While of interest on social media. Not a topic that's high up on the wider agenda I'd suggest. Other than when the media have little else to comment on. 

It is worth recalling that in the public sector DB schemes, tax free lump sums have effectively been abolished for many years, due to the use of a 12:1 commutation rate.

The LTA affects public sector scheme members adversely, but a lowering of the tax free limit would have very limited financial consequences as even for a higher rate taxpayer in retirement a 12:1 commutation rate is not particularly attractive.

Are you sure?  I've seen a few threads here claiming that lots of people in the public sector still take the maximum lump sum available as they are not even aware that 12:1 is not a good rate.

hugheskevi

zagfles said:

hugheskevi said:

Hoenir said:

MetaPhysical said:

I am going to go against the grain here and I think that a government could and possibly will reduce that £268k tax free cash sum and they may even have the nerve to do it retrospectively from the date of an election victory.  People able to take out such vast sums free of tax are a very soft and easy target for the government to rake in money from.  No one will shed a tear for these people and, indeed, could even be popular with the general electorate to rake in those "scoundrels with all that money".  I know I may get downvoted for this but I think this is very possible.  A government with a huge majority and four to five years out from an election can essentially do what it wants and I foresee that with a labour administration.
  
I also think the LTA will be brought back but maybe at a more realistic £2million.

I am thinking I am going to take the TFLS from my pension in case there is a change and it gets subjected to tapering in some way. 

The number impacted is very very small. A high % also work in the public sector and it's their DB scheme which is impacted. While of interest on social media. Not a topic that's high up on the wider agenda I'd suggest. Other than when the media have little else to comment on. 

It is worth recalling that in the public sector DB schemes, tax free lump sums have effectively been abolished for many years, due to the use of a 12:1 commutation rate.

The LTA affects public sector scheme members adversely, but a lowering of the tax free limit would have very limited financial consequences as even for a higher rate taxpayer in retirement a 12:1 commutation rate is not particularly attractive.

But they could use a linked AVC for the tax free lump sum.

Only LGPS has that option.

Pat38493 said:

hugheskevi said:

Hoenir said:

MetaPhysical said:

I am going to go against the grain here and I think that a government could and possibly will reduce that £268k tax free cash sum and they may even have the nerve to do it retrospectively from the date of an election victory.  People able to take out such vast sums free of tax are a very soft and easy target for the government to rake in money from.  No one will shed a tear for these people and, indeed, could even be popular with the general electorate to rake in those "scoundrels with all that money".  I know I may get downvoted for this but I think this is very possible.  A government with a huge majority and four to five years out from an election can essentially do what it wants and I foresee that with a labour administration.
  
I also think the LTA will be brought back but maybe at a more realistic £2million.

I am thinking I am going to take the TFLS from my pension in case there is a change and it gets subjected to tapering in some way. 

The number impacted is very very small. A high % also work in the public sector and it's their DB scheme which is impacted. While of interest on social media. Not a topic that's high up on the wider agenda I'd suggest. Other than when the media have little else to comment on. 

It is worth recalling that in the public sector DB schemes, tax free lump sums have effectively been abolished for many years, due to the use of a 12:1 commutation rate.

The LTA affects public sector scheme members adversely, but a lowering of the tax free limit would have very limited financial consequences as even for a higher rate taxpayer in retirement a 12:1 commutation rate is not particularly attractive.

Are you sure?  I've seen a few threads here claiming that lots of people in the public sector still take the maximum lump sum available as they are not even aware that 12:1 is not a good rate.

Lots take it, but that doesn't change the fact that it is effectively taxed and poor value.