25% Tax Free Private Pension Allowance

PKY

HappyHarry said:

The government haven't said that.

The only time they have mentioned tax free cash, as far as I am aware, is when they said in June that "The ability to withdraw 25 per cent of your pension as a tax-free lump sum is a permanent feature of the tax system and Labour are not planning to change this”

Speculation by the press which is then erroneously repeated on this board as factual statements needs to be discouraged.

My fear is they will keep 25% tax free but lower the maximum amount. 

The LTA has already been removed so why should the old LTA be used to calculate maximum tax free amount? Why not £250,000 this year and £200,000 next year. The spin will be that it will only effect "millionaire pensioners".

....and to fill the £22 billion hole there will have to be lots more cuts here and there, 1-2% on CGT, reduction of National Insurance relief on Sal Sac pensions and , IHT changes to pensions, remove the fuel duty suspension etc, etc.

dunstonh

The TLA has already been removed so why should the old TLA be used to calculate maximum tax free amount? Why not £250,000 this year and £200,000 next year. The spin will be that it will only effect "millionaire pensioners".

The cost of legislation to change it by a minuscule amount that will raise barely any revenue in the short term is high.

...and to fill the £22 billion hole there will have to be lots more cuts here and there, 1-2% on CGT, reduction of National Insurance relief on Sal Sac pensions and , IHT changes to pensions, remove the fuel duty suspension etc, etc.

CGT is likely to be a lot more than 1-2%.  The hot money is on equalisation with income tax rates.
Salsac has been one of the largest growth costs to the treasury over the last 25 years.  However, previous governments have looked at it and decided against it due to lots of unintended consequences.
IHT on pensions is almost certainly not going to happen.   Either the removal of the age 75 rule (which would largely give a similar outcome to IHT) and/or the introduction of wealth tax on death for funds above a certain amount are more likely.

Martico

I for one can't wait to see Private Eye's pages documenting the reverse ferrets from rags like the Telegraph, Mail and Express after the budget.
They've massively out-doomed the already (probably ill-advised) doom-heavy early pronouncements from the govt.

bjorn_toby_wilde

It feels like a kind of stealth tax on readers of the Telegraph/Mail/Express.

Some people seem to be making life changing decisions on the back of what is, even if you take a generous view of it, at best press speculation.

PKY

dunstonh said:

The LTA has already been removed so why should the old LTA be used to calculate maximum tax free amount? Why not £250,000 this year and £200,000 next year. The spin will be that it will only effect "millionaire pensioners".

The cost of legislation to change it by a minuscule amount that will raise barely any revenue in the short term is high.

Lots of small cuts to set a precedent than can be expanded on in succeeding years.

dunstonh said:

CGT is likely to be a lot more than 1-2%.  The hot money is on equalisation with income tax rates.

That's not easy either because if CGT is equalised with income tax it would really require inflation indexation. A small raise in CGT rate is easier and bettter optics?

Albermarle

dunstonh said:

The TLA has already been removed so why should the old TLA be used to calculate maximum tax free amount? Why not £250,000 this year and £200,000 next year. The spin will be that it will only effect "millionaire pensioners".

The cost of legislation to change it by a minuscule amount that will raise barely any revenue in the short term is high.

...and to fill the £22 billion hole there will have to be lots more cuts here and there, 1-2% on CGT, reduction of National Insurance relief on Sal Sac pensions and , IHT changes to pensions, remove the fuel duty suspension etc, etc.

CGT is likely to be a lot more than 1-2%.  The hot money is on equalisation with income tax rates.
Salsac has been one of the largest growth costs to the treasury over the last 25 years.  However, previous governments have looked at it and decided against it due to lots of unintended consequences.
IHT on pensions is almost certainly not going to happen.   Either the removal of the age 75 rule (which would largely give a similar outcome to IHT) and/or the introduction of wealth tax on death for funds above a certain amount are more likely.

IHT on pensions is almost certainly not going to happen

You seem very sure. Presumably due to too many complications with trust law etc ?

Either the removal of the age 75 rule (which would largely give a similar outcome to IHT) and/or the introduction of wealth tax on death for funds above a certain amount are more likely.

Could be a lot of people with big pots, splashing the cash, booking world cruises etc to get the pot down! Which is I guess is better for the economy/paying tax now, ( and the retiree ) than it sitting in a pension pot doing nothing, and waiting to be passed on as a legacy. 

dunstonh

IHT on pensions is almost certainly not going to happen

You seem very sure. Presumably due to too many complications with trust law etc ?

Nobody can be sure but when you consider the options available, the legislation to bring trust and contract based pensions into the estate seems to be the most complicated.   Whereas abolishing the age 75 rule is more straightforward and means any pensions inherited and drawn will pay income tax.  Smaller pots would be basic rate and larger pots higher rate or additional rate and with the potential for removal of the personal allowance.   So, actually, the treasury could earn more than IHT.      

And again, a wealth style tax specific to pensions would be easier to legislate.

So, Labour hitting death benefits, either at budget or following the pension review, is a strong possibility.   I just feel it will not be by bringing pensions into the estate.   Then again, never underestimate the ability of the civil service to overcomplicate simple things.

Robwales

Spoke to an IFA yesterday - this point of topic (with people considering / actually taking their lump sum ahead of the Autumn statement) is happening a bit.    I am < 55 so no option for me regardless of the speculation, press and anecdotes!

BTW - i thought this was a good read - interested what others think:

https://taxpolicy.org.uk/2024/09/25/the-tax-longlist-29-ways-rachel-reeves-could-raise-22bn