Labour's LTA plans?

Somebody

Cus said:

I never understood why they couldn't adjust the doctors dB pension so that they didn't accidentally put too much into it and have to pay an annual allowance tax charge

It's to do with their annual Pension Input Amounts.  See https://www.telegraph.co.uk/money/pensions/news/doctors-forced-retirement-receiving-9000-pension-tax-bills/

swindiff

sgx2000 said:

Omg 
I wonder what tiny percentage of the population are effected by the LTA......

I have a pension with USS (University employee), I am not a particularly high earner.  I have only just gone over the higher tax threshold in the last couple of years due to promotion.  I have a Defined Benefit pension with an additional defined contribution pension (it is a hybrid scheme).  I contribute 25% to the DC (this is a fairly recent thing, I could not afford to do this when I was younger with kids at home) and 6.1% into the DB.  The USS modeller predicts that I would hit the LTA (assuming I kept the contribution the same) at 67Y and 6M (I guess it will be removed when they update the modeller).  I have no intention of keeping working to that age, but it shows you don't have to be a massive earner to come close.  That is with what they call "standard" investment projection for the DC part, if I set it to "optimistic" I would hit the LTA before state pension age.

leosayer

Somebody said:

Cus said:

I never understood why they couldn't adjust the doctors dB pension so that they didn't accidentally put too much into it and have to pay an annual allowance tax charge

It's to do with their annual Pension Input Amounts.  See https://www.telegraph.co.uk/money/pensions/news/doctors-forced-retirement-receiving-9000-pension-tax-bills/

In other words, as I understand it, nothing to with LTA.

Cus

Somebody said:

Cus said:

I never understood why they couldn't adjust the doctors dB pension so that they didn't accidentally put too much into it and have to pay an annual allowance tax charge

It's to do with their annual Pension Input Amounts.  See https://www.telegraph.co.uk/money/pensions/news/doctors-forced-retirement-receiving-9000-pension-tax-bills/

Thanks, I read this type of explanation.

In my personal position, i get a salary and an annual discretionary bonus, which every year is subject to the taper allowance.
I don't exactly know what the bonus will be, so each tax year coming I guess it at a high over estimated level and inform HMRC so they know the right tax code for me, and also I know what my max DC pension contribution should roughly be, and if I over estimated, fine as I know I can then put a little more in.  I never get hit with a tax bill.

What's so hard about a doctor also estimating a large amount of overtime, and their DB pension provisionally putting less in to ensure no nasty tax bill.

I don't stop work and retire because I might have to taper. My DC pension ends up being less than I want, why do I have to deal with it?  (Apart from having a job that doesn't really help anyone:) )

Albermarle

Moonwolf said:

What is the LTA for?

The only purpose I can see is to stop the very rich hiding large amounts of wealth from tax and then inheritance tax by putting it in pensions.

I think the primary reason was to limit how much tax relief high earners could get in a lifetime( in most cases at 40%)

For me, (assuming the above is correct) this then raises follow-up questions.

- Doesn't the annual allowance do this? This has been pointed out many times on this forum, although at £40K and now £60K it was possibly a bit too high to be truly effective.
- Why not change the inheritance tax rules instead? It is a bit tricky legally and politically, but I think that will happen at some point.
- Why does it need to apply to DB pensions and money used to buy annuities, given they only generate income, which is taxed, they aren't a mechanism for passing on cash?

Higher rate tax relief is very generous, so something had to be done to stop it being abused by very high earners.

hugheskevi

Cus said:

Somebody said:

Cus said:

I never understood why they couldn't adjust the doctors dB pension so that they didn't accidentally put too much into it and have to pay an annual allowance tax charge

It's to do with their annual Pension Input Amounts.  See https://www.telegraph.co.uk/money/pensions/news/doctors-forced-retirement-receiving-9000-pension-tax-bills/

Thanks, I read this type of explanation.

In my personal position, i get a salary and an annual discretionary bonus, which every year is subject to the taper allowance.
I don't exactly know what the bonus will be, so each tax year coming I guess it at a high over estimated level and inform HMRC so they know the right tax code for me, and also I know what my max DC pension contribution should roughly be, and if I over estimated, fine as I know I can then put a little more in.  I never get hit with a tax bill.

What's so hard about a doctor also estimating a large amount of overtime, and their DB pension provisionally putting less in to ensure no nasty tax bill.

I don't stop work and retire because I might have to taper. My DC pension ends up being less than I want, why do I have to deal with it?  (Apart from having a job that doesn't really help anyone:) )

From the doctor's perspective, they only have the choice to be in the pension scheme or to leave it, they have no flexibility to adjust benefits. It is also difficult to accurately calculate PIAs in advance in a DB scheme, whereas it is very easy with DC.

From the Exchequer's perspective, they do not want pension/pay flex as pension liabilities only affect National Debt years down the line when members retire (as the schemes are unfunded), whereas pay is money out the door now. Offer flex to one group, and it will be very hard to stop it spreading.

There is also the presentational difficulty of the NHS being seen to collude in tax avoidance, and also to be making special arrangements for those in the least need (eg, why do something to help with tax of these high earners when you are don't do anything for nurses, type of arguments).

hyubh

leosayer said:

Somebody said:

Cus said:

I never understood why they couldn't adjust the doctors dB pension so that they didn't accidentally put too much into it and have to pay an annual allowance tax charge

It's to do with their annual Pension Input Amounts.  See https://www.telegraph.co.uk/money/pensions/news/doctors-forced-retirement-receiving-9000-pension-tax-bills/

In other words, as I understand it, nothing to with LTA.

Tell that to the BMA! They celebrated increased AA allowance and the abolition of the LTA as one great victory (https://www.bma.org.uk/bma-media-centre/chancellor-listens-to-bma-with-pension-taxation-reform-to-help-keep-senior-doctors-in-the-nhs).

michaels

hyubh said:

leosayer said:

Somebody said:

Cus said:

I never understood why they couldn't adjust the doctors dB pension so that they didn't accidentally put too much into it and have to pay an annual allowance tax charge

It's to do with their annual Pension Input Amounts.  See https://www.telegraph.co.uk/money/pensions/news/doctors-forced-retirement-receiving-9000-pension-tax-bills/

In other words, as I understand it, nothing to with LTA.

Tell that to the BMA! They celebrated increased AA allowance and the abolition of the LTA as one great victory (https://www.bma.org.uk/bma-media-centre/chancellor-listens-to-bma-with-pension-taxation-reform-to-help-keep-senior-doctors-in-the-nhs).

And yet despite a huge effective pay increase through pension tax reform, an 11% salary increase when inflation is 4% is still not enough for them....

MetaPhysical

Cus said:

I never understood why they couldn't adjust the doctors dB pension so that they didn't accidentally put too much into it and have to pay an annual allowance tax charge

Fix the root cause of the problem and stop making exceptions.

In my view making special provision for doctors would be unfair to many other, equally worthy professions and would amount to state discrimination (yes, I know they do this for judges already).  Great work that they do but why should a doctor or consultant be treated preferentially to a head teacher, a lawyer, a high raking police or forces person or engineer.  Even a banker - bad rap that they get but we need bankers.  We need all these professions and we should incentivise these people not to retire early just because they've hit an arbitrary number.  I can't stand Jeremy Hunt but he was right to remove the ridiculous LTA.  Labour would be equally ridiculous to reinstate it..

Silvertabby

Just read that Kier Starmer still intends to spend (borrow?) 28 Billion per year on green agendas.  That money will have to come from somewhere.....