NFU Mutual advising people to max out Pension & ISA contributions before the budget

Money_Grabber13579

Aretnap said:

Also, there has been a lot of (equally wild) speculation about cuts to the amount of tax free money that you can withdraw from pensions. Have NFU Mutual put out a press statement suggesting that customers should withdraw their 25% tax free cash while they still can? Thought not. 

Why would a company that manages pensions suggest that people should pay money into pensions in a panic, but not that they should withdraw it from pensions in a panic? I've thought about this question for a while, but can't really figure it out. It's one of life's mysteries I suppose.

Availing of the 25% tax free lump sum isn’t as clear cut an issue. Putting money in to take advantage of tax reliefs before the budget, if you were already planning to avail of those reliefs is a no brainer.

But when availing of the 25% tax free lump sum, you have you consider the inheritance tax implications that brings as it becomes part of your estate, whereas whilst it’s in the pension, it might not be. Both of those things could possible change in the budget but it means it’s more subjective as to what the best approach is.

Money_Grabber13579

Grumpy_chap said:

zagfles said:

changing the limit as to what constitutes a high earner. 

Well, that article you linked indicated that "high earner" was £150k and reduced to £130k.  I suspect by now, "high earner" will be £50k or less.

Cynical alert - MPs are unlikely to implement anything that disadvantages themselves so at £50k, they would all become high earners.

Grumpy_chap

Money_Grabber13579 said:

Putting money in to take advantage of tax reliefs before the budget, if you were already planning to avail of those reliefs is a no brainer.

Is it?
I am actually considering whether I max out my contributions this month or later in the tax year.  I planned to make contributions later in the tax year as it suits my cash flow better, but risk of sacrificing the 25% tax relief on entry would make the early contribution sensible.

However, is it possible that the Government change something related to how funds within the pension fund are treated?  Similar to the way dividend tax credits were removed way back by Gordon Brown.  I am not knowledgeable enough to assess whether a similar raid is possible - i.e. is there anything similar to attack?

A repeat of something similar might well make pension contributions effectively pointless even if the 25% relief on entry remains.  A repeat of the dividend tax credit change (or similar) would be less likely to attract the same level of immediate scorn, nor would many people realise the change unlike the withdrawal of contribution relief.

zagfles

Grumpy_chap said:

Money_Grabber13579 said:

Putting money in to take advantage of tax reliefs before the budget, if you were already planning to avail of those reliefs is a no brainer.

Is it?
I am actually considering whether I max out my contributions this month or later in the tax year.  I planned to make contributions later in the tax year as it suits my cash flow better, but risk of sacrificing the 25% tax relief on entry would make the early contribution sensible.

However, is it possible that the Government change something related to how funds within the pension fund are treated?  Similar to the way dividend tax credits were removed way back by Gordon Brown.  I am not knowledgeable enough to assess whether a similar raid is possible - i.e. is there anything similar to attack?

A repeat of something similar might well make pension contributions effectively pointless even if the 25% relief on entry remains.  A repeat of the dividend tax credit change (or similar) would be less likely to attract the same level of immediate scorn, nor would many people realise the change unlike the withdrawal of contribution relief.

The dividend tax credit change made a small difference to the tax efficiency of pensions, it certainly didn't make contributions "pointless". It's unlikely anything would make them pointless, other than something really radical like means testing the state pension. But I don't think even this lot would be that stupid!

Flat rate relief is a real possibility, so for people getting higher rate relief who were going to contribute this year anyway it might be sensible to do so before the budget in case similar anti-forestalling legislation to 2009 is introduced.

But for others eg basic rate taxpayers contributing by RAS or net pay it might actually be sensible to delay contributing, as flat rate could well be above basic rate. If they're using sal sac it would depend on exactly how it's implemented. 

All guesswork obviously

Hoenir

zagfles said:

Grumpy_chap said:

Money_Grabber13579 said:

Putting money in to take advantage of tax reliefs before the budget, if you were already planning to avail of those reliefs is a no brainer.

Is it?
I am actually considering whether I max out my contributions this month or later in the tax year.  I planned to make contributions later in the tax year as it suits my cash flow better, but risk of sacrificing the 25% tax relief on entry would make the early contribution sensible.

However, is it possible that the Government change something related to how funds within the pension fund are treated?  Similar to the way dividend tax credits were removed way back by Gordon Brown.  I am not knowledgeable enough to assess whether a similar raid is possible - i.e. is there anything similar to attack?

A repeat of something similar might well make pension contributions effectively pointless even if the 25% relief on entry remains.  A repeat of the dividend tax credit change (or similar) would be less likely to attract the same level of immediate scorn, nor would many people realise the change unlike the withdrawal of contribution relief.

The dividend tax credit change made a small difference to the tax efficiency of pensions, it certainly didn't make contributions "pointless".

Drove DB pension funds of UK equities and into bonds. Increasing the speed of their demise. £5 billion a year was a hefty sum back them. Now we are suffering the longer term issues of the sale of the family silver as UK companies pass endlessly into foreign ownership. 

zagfles

Hoenir said:

zagfles said:

Grumpy_chap said:

Money_Grabber13579 said:

Putting money in to take advantage of tax reliefs before the budget, if you were already planning to avail of those reliefs is a no brainer.

Is it?
I am actually considering whether I max out my contributions this month or later in the tax year.  I planned to make contributions later in the tax year as it suits my cash flow better, but risk of sacrificing the 25% tax relief on entry would make the early contribution sensible.

However, is it possible that the Government change something related to how funds within the pension fund are treated?  Similar to the way dividend tax credits were removed way back by Gordon Brown.  I am not knowledgeable enough to assess whether a similar raid is possible - i.e. is there anything similar to attack?

A repeat of something similar might well make pension contributions effectively pointless even if the 25% relief on entry remains.  A repeat of the dividend tax credit change (or similar) would be less likely to attract the same level of immediate scorn, nor would many people realise the change unlike the withdrawal of contribution relief.

The dividend tax credit change made a small difference to the tax efficiency of pensions, it certainly didn't make contributions "pointless".

Drove DB pension funds of UK equities and into bonds. Increasing the speed of their demise. £5 billion a year was a hefty sum back them. Now we are suffering the longer term issues of the sale of the family silver as UK companies pass endlessly into foreign ownership. 

Yeah. But it didn't make contributions "pointless". 

Albermarle

Money_Grabber13579 said:

Aretnap said:

Also, there has been a lot of (equally wild) speculation about cuts to the amount of tax free money that you can withdraw from pensions. Have NFU Mutual put out a press statement suggesting that customers should withdraw their 25% tax free cash while they still can? Thought not. 

Why would a company that manages pensions suggest that people should pay money into pensions in a panic, but not that they should withdraw it from pensions in a panic? I've thought about this question for a while, but can't really figure it out. It's one of life's mysteries I suppose.

Availing of the 25% tax free lump sum isn’t as clear cut an issue. Putting money in to take advantage of tax reliefs before the budget, if you were already planning to avail of those reliefs is a no brainer.

But when availing of the 25% tax free lump sum, you have you consider the inheritance tax implications that brings as it becomes part of your estate, whereas whilst it’s in the pension, it might not be. Both of those things could possible change in the budget but it means it’s more subjective as to what the best approach is.

Also with a large sum now outside the pension, it is also likely to be subject to savings interest tax/dividend tax and CGT.

zagfles

Albermarle said:

Money_Grabber13579 said:

Aretnap said:

Also, there has been a lot of (equally wild) speculation about cuts to the amount of tax free money that you can withdraw from pensions. Have NFU Mutual put out a press statement suggesting that customers should withdraw their 25% tax free cash while they still can? Thought not. 

Why would a company that manages pensions suggest that people should pay money into pensions in a panic, but not that they should withdraw it from pensions in a panic? I've thought about this question for a while, but can't really figure it out. It's one of life's mysteries I suppose.

Availing of the 25% tax free lump sum isn’t as clear cut an issue. Putting money in to take advantage of tax reliefs before the budget, if you were already planning to avail of those reliefs is a no brainer.

But when availing of the 25% tax free lump sum, you have you consider the inheritance tax implications that brings as it becomes part of your estate, whereas whilst it’s in the pension, it might not be. Both of those things could possible change in the budget but it means it’s more subjective as to what the best approach is.

Also with a large sum now outside the pension, it is also likely to be subject to savings interest tax/dividend tax and CGT.

Which could all be increased in the budget. But even if the 25% was reduced, it's highly unlikely it would be backdated, that would be retrospective taxation, I'd expect something similar to when the max PCLS was reduced in the past ie when the LTA was reduced, with transitional protection for anyone already over the limit. 

Altior

The government have gone out of the way to make us that feel that the upcoming budget is going to be 'brutal', but won't impact 'working people' according to their recent manifesto pledge - "not increase taxes on working people"

When asked specifically what 'working people' are, Keir Starmer said they are people who are working but do not have meaningful savings. Rachel Reeves subsequently 'clarified' this as:

"Sort of by definition, really, working people are those people who go out and work and earn their money through hard work."

Of course, many wise heads will look to be critical of people those overly concerned about this, dismissing idle speculation, happens before every budget et al. Perhaps even critical of some broadcasters and press speculation/kite flying. 

However, people do not need to be logical geniuses to figure out what is left when that is distilled down to what has not been ruled out. People who don't work, children and pensioners & those with capital and savings. Instinctively, children will be safe, and so will those of working age who don't work and claim to have little savings and capital. Leaving pensioners and working age adults who have capital and/or savings.

Whether people can do anything about what's coming is another matter, but I have them right to be worried, personally. 

Grumpy_chap

zagfles said:

Flat rate relief is a real possibility, so for people getting higher rate relief who were going to contribute this year anyway it might be sensible to do so before the budget in case similar anti-forestalling legislation to 2009 is introduced.

But for others eg basic rate taxpayers contributing by RAS or net pay it might actually be sensible to delay contributing, as flat rate could well be above basic rate. If they're using sal sac it would depend on exactly how it's implemented. 

All guesswork obviously

Thanks - that makes good sense and show knowledge on the mechanics of things (not the policy obviously as RR owns that).

So, as I have £50k left of my AA to make as company (employer) contributions, it may make sense to get on with those contributions this side of the budget.

Mrs G-C, however, as a non-earner and basic rate tax payer can only make contributions of £2,880 which will be grossed up to £3,600.  Only this lunch time (I think she saw a scaremongering click-bait article) was saying she wanted to get in now or not bother ever.  Quite possibly, she may be just as well off waiting.