Labour's LTA plans?

NoMore

Judges in their 1995 scheme are not subject to the LTA, so there is already precedent for giving different professions different protections. 

MarkCarnage

NoMore said:

Judges in their 1995 scheme are not subject to the LTA, so there is already precedent for giving different professions different protections. 

Bad precedent...some judges are quite good at that too! 

Altmann in the Daily Torygraph is something I take with a large pinch of salt too.....

ewaste

MetaPhysical said:

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.

I think a specific public sector exception is highly unlikely and unworkable. It wouldn't be needed either, just change the methodology used for calculating DB utilisation of the LTA and AA. Besides didn't the Current Government already fudge the AA in 2023 by delaying the increase in NHS pensions? Then as mentioned the Judicial Pension Scheme is already a glaring precedent.

In my opinion it's been decades since the Public Sector was truly a Labour stronghold, just as 'class' or 'wealth' no longer determine voting intentions as strongly as it used to. 

zagfles

ewaste said:

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. 

Well that's constructive criticism. Of course it has bias, as does practically every newspaper story, but Ros at least understands pensions and is usually worth listening to. There's a similar article in the I who can hardly be accused of Tory bias https://inews.co.uk/inews-lifestyle/money/pensions-and-retirement/labour-public-sector-tax-pension-2898569

Labour are being completely irreponsible with this. People need to know now what their plans are, given it looks likely they'll be in power later this year. How can people make plans about their retirement if there is a serious prospect of big adverse rule changes in a year's time?  They keep coming up with reassurances aimed at particular goups, eg their latest “Our solution will reintroduce a lifetime allowance in a way that ensures that we retain public service leaders.” 

Do they think only "public service leaders" matter?

zagfles

michaels said:

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?

The way the LTA used to work would be a 40% tax on the way out if you've exceeded the LTA and are a basic rate taxpayer in retirement (25% LTA charge compounded with 20% tax). So if you're a basic rate taxpayer when contributing then pensions are very tax inefficient, even if you use sal sac and get 30% effective relief. Unless you get other sort of relief eg extra tax credits.

michaels

Isn't the takeaway that far from just being a kneejerk reaction when the limit was scrapped, Labour are obviously currently thinking about how it will be reinstated which does not seem to match the general consensus on here that it is never coming back.

zagfles

Pat38493 said:

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?

They could introduce anti-forstalling legislation, or announce it'll take effect from today at an emergency budget even if the legislation takes time to pass. Unlikely they'd backdate it to before they were in power, while theoretically possible it'd be unprecendented (I think). It'd be like backdating a change to the law.

najan49

NoMore said:

Judges in their 1995 scheme are not subject to the LTA, so there is already precedent for giving different professions different protections. 

Don’t know about the 1995 scheme but the current 2022 pension scheme for judges is tax-unregistered, so they are exempt from LTA but also don’t get tax relief on contributions.

zagfles

michaels said:

Isn't the takeaway that far from just being a kneejerk reaction when the limit was scrapped, Labour are obviously currently thinking about how it will be reinstated which does not seem to match the general consensus on here that it is never coming back.

Given their much higher profile recent u-turns (banker's bonuses and "green investment" plan) it does seem strange they're sticking with this one. Or maybe they don't want too many u-turns too close together?

I suspect they'll do something - perhaps reintroduce it at the "Labour" level of 1.8 or 2.5 million, or perhaps do something with tax, or inheritance etc.

zagfles

Pat38493 said:

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).

With IHT it's not just paying it that's the issue but about all the form filling, about the valuation of personal effects, even household contents like cutlery, plates, chairs etc which people have to do to get probate. I've helped administer 2 estates which were nowhere near the IHT threshold but you still have to go through all this intrusive nonsense at a time of grief.

But on the broader point, yes people generally aren't that selfish, if they see something unfair they don't like it even if it doesn't affect them personally. On the LTA, polls showed about 50/50 support even though the vast majority wouldn't have been personally affected. Same with stuff like higher tax rates for higher earners. Which is why all the Labour election victories in the last almost 50 years have come with a promise not to raise tax rates.