Labour's LTA plans?

michaels

RogerPensionGuy said:

A good link below. 
☆☆☆
https://www.telegraph.co.uk/money/tax/income/labours-pension-tax-plot-new-era-of-retirement-inequality/

I was about to post the same - doe snot seem like Labour have dropped any plan to reintroduce the LTA - merely to construct a public sector carve out

So we are back to what to do about it if there is a possibility that it is coming and you would be impacted.  I can't draw pension at all until June 25 so probably too late but perhaps I should not be contributing any at the moment as I only get basic rate relief but all contributions would be subject to LA charges.

Does anyone have any advice on how exactly this works?  What is the overall impact of basic rate relief contributions that are then subject to a LA charge (they are a mix of DB and DC, assuming I don't take a DB lump sum - poor commutation rate - the DC bit will still achieve a 25% TFLS under the 1.073m pot size rule)

Thoughts?

Silvertabby

RogerPensionGuy said:

A good link below. 
☆☆☆
https://www.telegraph.co.uk/money/tax/income/labours-pension-tax-plot-new-era-of-retirement-inequality/

So, possible that Labour would re-instate the LTA, but exempt public sector workers.

Very 'Animal Farm'.  

michaels

So it looks like I might be able to avoid the punitive LTA charge by taking my DB early with a reduction whereas previously I was looking to build a guaranteed income bridge by investing most of my DC into index linked gilts / a fixed term rpi annuity.  Not the end of the world but it just means that less of my pension will be inflation protected and more will be subject to SOR risk (swr)

Edit - even taking it and retiring at earliest point leaves me dangerously close to LTA based on current high market levels.  I may need a complete rethink of my pension strategy over the next 15 months

The consensus is to only plan against known regulations but in this case it would seem sensible to also factor in announced policy...

ex-pat_scot

I hit the magic 55 in a few months...
Watching with (vested) interest in the current political noises.
Not overly concerned, selfishly, as I will have the flexibility to react quickly to any changes.
I'm planning on taking the full TFLS asap, and use it to feed into the mortgage, wrap into 2x ISAs.
There's no point in leaving it in the SIPP, where its value erodes against inflation and it would be vulnerable to political risk.
I think the chance of retrospective TFLS / LTA tax is vanishingly small in the short and medium term.

Of course, if a snap election is called tomorrow, then I'd be slightly alarmed that a day 1 new government might announce immediate changes, just before I can touch the pension - either in pushing back the age of earliest access from 55, or in the amount / process for tax free and LTA.
I don't think a snap election is likely before May. I think the current incumbents are torn between a despair-led scorched earth policy, and a desperate hope of things somehow getting better before they have to call the election at the end of the year.

Pat38493

michaels said:

So it looks like I might be able to avoid the punitive LTA charge by taking my DB early with a reduction whereas previously I was looking to build a guaranteed income bridge by investing most of my DC into index linked gilts / a fixed term rpi annuity.  Not the end of the world but it just means that less of my pension will be inflation protected and more will be subject to SOR risk (swr)

Edit - even taking it and retiring at earliest point leaves me dangerously close to LTA based on current high market levels.  I may need a complete rethink of my pension strategy over the next 15 months

The consensus is to only plan against known regulations but in this case it would seem sensible to also factor in announced policy...

Even if this was true (and I keep in mind that it is the Daily Telegraph that is saying this which some refer to as the "in house magazine" of the Conservative party), the question is:
- How quickly would a new government be able to re-introduce the LTA?  The current lot have taken almost a year to prepare all the legislative changes required.  I am not sure how easy it would be to reverse all quickly that without accidently unpicking other things as well as it's all part of a big finance bill.  My working assumption is that they would not be able to re-introduce the LTA in less than 6 months from taking office and it would require primary legislation.  This is especially the case if they want to re-introduce it whilst exempting certain professions and there would be a potential question of legal challenges if this might result in indirect discrimination of some kind.
- Would they be able to retrospectively hit those who benefitted during the last year from the missing LTA - convention from all governments in the past is that such legislation is not made retrospective, and anyone who will be affected immediately would be offered some kind of protection?

Albermarle

Silvertabby said:

RogerPensionGuy said:

A good link below. 
☆☆☆
https://www.telegraph.co.uk/money/tax/income/labours-pension-tax-plot-new-era-of-retirement-inequality/

So, possible that Labour would re-instate the LTA, but exempt public sector workers.

Very 'Animal Farm'.  

The fact that it is an article in the DT about Labour, and using emotive words like 'plot' means it is unlikely to be an objective analysis of the facts.

However if the idea of public sector workers being exempt is a goer, then I suspect it might be more related to IHT.
A higher LTA for a DB pension does not lead to higher IHT avoidance, whilst the abolishing of LTA for DC pensions has increased the amount that can be protected from IHT ( for those who die with DC pots above £1.07M) 

Pat38493

Albermarle said:

Silvertabby said:

RogerPensionGuy said:

A good link below. 
☆☆☆
https://www.telegraph.co.uk/money/tax/income/labours-pension-tax-plot-new-era-of-retirement-inequality/

So, possible that Labour would re-instate the LTA, but exempt public sector workers.

Very 'Animal Farm'.  

The fact that it is an article in the DT about Labour, and using emotive words like 'plot' means it is unlikely to be an objective analysis of the facts.

However if the idea of public sector workers being exempt is a goer, then I suspect it might be more related to IHT.
A higher LTA for a DB pension does not lead to higher IHT avoidance, whilst the abolishing of LTA for DC pensions has increased the amount that can be protected from IHT ( for those who die with DC pots above £1.07M) 

The counter argument there is that anything that's perceived as increasing IHT is perceived a a vote loser by political parties - apparently IHT is a very unpopular tax not just amongst the people who might have to pay it, but even people who probably will never have to pay it - seems a bit odd but apparently that is what polling and focus groups consistently shows.  It seems like even people who probably won't pay IHT see it as unjust and unfair.  (personally I don't agree but I am apparently against the grain there).

ewaste

RogerPensionGuy said:

A good link below. 
☆☆☆
https://www.telegraph.co.uk/money/tax/income/labours-pension-tax-plot-new-era-of-retirement-inequality/  

Christ, I've had more impartial analysis and informative commentary from skidmarks in a public toilet. 

Ros Altmann a Tory Peer, writing in the Torygraph which then essentially references itself. The content and language used in the article is hardly any form of analysis, it's a political puff piece written by a politician.

I don't see the LTA returning in the manner we've seen it previously, it'd be a lot of hassle and there are alternatives. 

Grumpy_chap

Albermarle said:

 abolishing of LTA for DC pensions has increased the amount that can be protected from IHT ( for those who die with DC pots above £1.07M) 

That must be a very small number indeed.
The majority do not have DC pots above the £1m level at any point in their lives.
Some will have the £1M pot and die before retirement.  So they get to exploit the IHT loophole.
Some will have the £1M pot at some point but then deplete the pot during their retirement so below the £1M threshold by the time of death.
Some will have the £1M pot, draw their retirement income and still have a £1M pot remaining by the time of death.  They also get to exploit this IHT loophole.

As tax loopholes go, this is only for those who leave while young or those that had such a large pension pot it remained at £1M by the time of death.
The total of both cohorts must be a very small number.

MetaPhysical

Like I mentioned earlier, why should the government be discriminating different professions?  Will they be passing judgement on what professions they consider are more "worthy"?  A doctor is more worthy of "protection" than an engineer or solicitor?  So a solicitor in the private sector gets no protection and one in the public does?  We need professionals of all types in our economy.

If they want to reintroduce a LTA it needs to be very much higher than the paltry £million that it was, so that "working" people are minimally impacted.