Lump sum pension contribution before potential Labour tax raid?

Grumpy_chap

Ron_Weasley said:

I think that's really bad advice. Totally foolish IMO for me to not consider future possibilities and plan / act accordingly.

One does not need to be Warren Buffet in order to recognise that any incoming government is going to face some difficult spending Vs taxing Vs borrowing decisions. And having ruled out changes to the big revenue streams (income tax, VAT etc) it is not rocket science to figure out that other tax opportunities may be in the firing line. Inheritance tax, capital gains tax and pension tax relief being the obvious candidates.

I have come into a high income bracket very late in life and do not have millions to fall back on. I am carefully planning how much I may need in my (hopefully imminent) retirement and can well do without losing potentially tens of thousands due to not giving any thoughts to possible future changes. If you are lucky enough to not have to think about such things then good on you.

The only way you can make a judgement on that is to base your assessment on what is (or what is not) written in the manifesto of the respective parties and / or ask the local candidates to explain the policy area.
No-one here can comment with any better certainty as to what may happen under a future Government.

Hoenir

Ron_Weasley said:

JoeCrystal said:

Here is an idea: How about we wait and see? What if things change? Pensions and all financial matters are always subject to the whims of governments anyway. Ron_Weasley will have to put up with changes anyway, but I suspect they can tolerate such changes better than most!  Enough about political fearmongering anyway. This is just like every time there is a budget; there are always rumours about removing a tax-free lump sum, and guess what? That has not happened!

Budgets and statements are made, laws and regulations are changed, and we, like everyone else in the country, must put up with it. I certainly do not have time to worry about what might happen in the next tax year; it is best to focus on what is possible right now regarding retirement provision and make changes when and if necessary.

 And having ruled out changes to the big revenue streams (income tax, VAT etc) it is not rocket science to figure out that other tax opportunities may be in the firing line.

There's already fiscal drag in place as far as income tax is concerned. 

zagfles

Grumpy_chap said:

Ron_Weasley said:

I think that's really bad advice. Totally foolish IMO for me to not consider future possibilities and plan / act accordingly.

One does not need to be Warren Buffet in order to recognise that any incoming government is going to face some difficult spending Vs taxing Vs borrowing decisions. And having ruled out changes to the big revenue streams (income tax, VAT etc) it is not rocket science to figure out that other tax opportunities may be in the firing line. Inheritance tax, capital gains tax and pension tax relief being the obvious candidates.

I have come into a high income bracket very late in life and do not have millions to fall back on. I am carefully planning how much I may need in my (hopefully imminent) retirement and can well do without losing potentially tens of thousands due to not giving any thoughts to possible future changes. If you are lucky enough to not have to think about such things then good on you.

The only way you can make a judgement on that is to base your assessment on what is (or what is not) written in the manifesto of the respective parties and / or ask the local candidates to explain the policy area.
No-one here can comment with any better certainty as to what may happen under a future Government.

Of course that's not the only way. In fact asking the candidates is utterly pointless, they'll just parrot the party line. Even manifesto promises are broken all the time. 

You can use "past performance", or past actions, in the same way as people assume equities will rise over the long term etc based on past performance. You can look at the top politicians' opinions and writings before they became top politicians, to see what they really think before they got shoehorned into parroting the party line which is designed to get them elected.  

Obviously it's all speculation but discussing what might happen wrt govt policy and how that may affect investments is no different to discussing what might happen in the wider world to affect the price of equities, bonds etc. 

ussdave

[Deleted User] said:

hyubh said:

Struggling to think of a public sector DB scheme where regular contributions are permissible as salary sacrifice...

Universities? 

TPS and LGPS are public sector schemes used in a lot of universities that don't (afaik) allow SS for the DB contributions.

USS is a private scheme, but does allow SS for all contributions (though some institutions themselves don't).

I'm not sure of the others (e.g. SAUL).

Linton

Ron_Weasley said:

JoeCrystal said:

Here is an idea: How about we wait and see? What if things change? Pensions and all financial matters are always subject to the whims of governments anyway. Ron_Weasley will have to put up with changes anyway, but I suspect they can tolerate such changes better than most!  Enough about political fearmongering anyway. This is just like every time there is a budget; there are always rumours about removing a tax-free lump sum, and guess what? That has not happened!

Budgets and statements are made, laws and regulations are changed, and we, like everyone else in the country, must put up with it. I certainly do not have time to worry about what might happen in the next tax year; it is best to focus on what is possible right now regarding retirement provision and make changes when and if necessary.

I think that's really bad advice. Totally foolish IMO for me to not consider future possibilities and plan / act accordingly.

One does not need to be Warren Buffet in order to recognise that any incoming government is going to face some difficult spending Vs taxing Vs borrowing decisions. And having ruled out changes to the big revenue streams (income tax, VAT etc) it is not rocket science to figure out that other tax opportunities may be in the firing line. Inheritance tax, capital gains tax and pension tax relief being the obvious candidates.

I have come into a high income bracket very late in life and do not have millions to fall back on. I am carefully planning how much I may need in my (hopefully imminent) retirement and can well do without losing potentially tens of thousands due to not giving any thoughts to possible future changes. If you are lucky enough to not have to think about such things then good on you.

The number of future possibilities is infinite.  Good mitigation for one could easily be disastrous if something else happens.  Look at what happened to bonds.

There is always something different coming to the "possibility" list, you can't be continually changing direction.    Best to keep your investments well diversified and avoid meddling.  This minimises the chance of an isolated event devastating your portfolio and maximises the chance that you benefit to some extent from unexpectedly good news.

If "events", or worse, potential events, generally worry you perhaps you are invested at too high a risk level and  returns and stress level could benefit if you turned things down a bit. This is especially true if you are approaching a date when you need to withdraw a significant amount of money.

zagfles

Linton said:

Ron_Weasley said:

JoeCrystal said:

Here is an idea: How about we wait and see? What if things change? Pensions and all financial matters are always subject to the whims of governments anyway. Ron_Weasley will have to put up with changes anyway, but I suspect they can tolerate such changes better than most!  Enough about political fearmongering anyway. This is just like every time there is a budget; there are always rumours about removing a tax-free lump sum, and guess what? That has not happened!

Budgets and statements are made, laws and regulations are changed, and we, like everyone else in the country, must put up with it. I certainly do not have time to worry about what might happen in the next tax year; it is best to focus on what is possible right now regarding retirement provision and make changes when and if necessary.

I think that's really bad advice. Totally foolish IMO for me to not consider future possibilities and plan / act accordingly.

One does not need to be Warren Buffet in order to recognise that any incoming government is going to face some difficult spending Vs taxing Vs borrowing decisions. And having ruled out changes to the big revenue streams (income tax, VAT etc) it is not rocket science to figure out that other tax opportunities may be in the firing line. Inheritance tax, capital gains tax and pension tax relief being the obvious candidates.

I have come into a high income bracket very late in life and do not have millions to fall back on. I am carefully planning how much I may need in my (hopefully imminent) retirement and can well do without losing potentially tens of thousands due to not giving any thoughts to possible future changes. If you are lucky enough to not have to think about such things then good on you.

The number of future possibilities is infinite.  Good mitigation for one could easily be disastrous if something else happens.  Look at what happened to bonds.

There is always something different coming to the "possibility" list, you can't be continually changing direction.    Best to keep your investments well diversified and avoid meddling.  This minimises the chance of an isolated event devastating your portfolio and maximises the chance that you benefit to some extent from unexpectedly good news.

If "events", or worse, potential events, generally worry you perhaps you are invested at too high a risk level and  returns and stress level could benefit if you turned things down a bit. This is especially true if you are approaching a date when you need to withdraw a significant amount of money.

Exactly - look what happened to bonds. There were plenty of people on here describing bonds as "return free risk" during the period of near zero interest rates. That seemed to make sense, so I used cash rather than bonds in that period, and am glad I listen to that speculation! The downside of using cash was minimal, similar returns, but without the risk of big capital loss if interest rates started rising.  

If the downside of mitigating something which may not happen is minimal compared to the downside if it does happen, then even if the risk of it happening is small it may be worth mitigating it. For instance if a higher/additional rate taxpayer was intending to make a large pension contribution anyway, then doing it now rather than later, if they have the money available, may be an idea. If there isn't a repeat 2009, then probably no harm done. If there is, then it may save thousands in tax. 

Pat38493

As far as I know, Labour has been quoted at saying that they will not hold an emergency budget for at least several months - probably the autumn.  Obviously they could change their mind or whatever, but I think the chance of them bringing in legislation that would reduce tax relief on pension contributions and be effective immediately tomrrow or next week are pretty slim - I personally will not change anything at this moment.

Malthusian

Ron_Weasley said:

One does not need to be Warren Buffet in order to recognise that any incoming government is going to face some difficult spending Vs taxing Vs borrowing decisions. And having ruled out changes to the big revenue streams (income tax, VAT etc) it is not rocket science to figure out that other tax opportunities may be in the firing line. Inheritance tax, capital gains tax and pension tax relief being the obvious candidates.

All of those considerations suggest that a pension contribution would be a good idea. 

• Pensions are exempt from Inheritance Tax (albeit transfers to spouses on death after 75 are not exempt)
• Pensions are free of capital gains tax
• If pension tax relief is slashed again, those who filled their boots at its current level will be laughing. Just like when the annual allowance was slashed to £40,000.

Of course the Government could also impose Inheritance Tax on death benefits, remove the CGT exemption, abolish the 25% tax free lump sum and force everyone to invest 100% of their pensions in crappy UK-registered companies. Nobody knows (although personally I think all of those are unlikely except the first one).

However retrospective taxation is both extremely unpopular and extremely pointless. Any change that screws over pension holders is likely to cost the Government a huge amount of money when people stop saving into pensions and rely on the State or buy-to-lets instead. The direction of travel for the last two decades has consistently been to make pensions more attractive, while making it more difficult to put money into them. 

Hoenir

Malthusian said:

Ron_Weasley said:

One does not need to be Warren Buffet in order to recognise that any incoming government is going to face some difficult spending Vs taxing Vs borrowing decisions. And having ruled out changes to the big revenue streams (income tax, VAT etc) it is not rocket science to figure out that other tax opportunities may be in the firing line. Inheritance tax, capital gains tax and pension tax relief being the obvious candidates.

 Any change that screws over pension holders is likely to cost the Government a huge amount of money when people stop saving into pensions and rely on the State or buy-to-lets instead. 

No shortage of holiday homes coming onto the market. Tide is turning. 

Grandst2

They have form on pensions so don't be a victim, anticipate and act. Let them spend other people's pensions not yours. Retrospective changes are unlikely.