Budget Day - will there be an immediate clamping of taking 25% Tax Free from Pension?

snootybutnice

I've asked my financial advisor about this, and he insists that the government is highly unlikely to remove the 25% tax free we can obtain from our personal pension - in fact he said '97% it will not happen' - he also continued to say if it were to happen, the Government is already short on money so if everyone took out 25% of their tax free money to avoid this charge, there would be mayhem. 

He also explained that it's not like a rate increase which can be done immediately - so this has to be legally voted in. However in ChatGPT it says if it's voted through months later in the Finance Bill they could backdate it to budget day - so waiting until after the vote wouldn't help us as the date may already be locked in. Equally ChatGPT says they may announce the change from next tax year. 

Which is the truth?

Dazed_and_C0nfused

snootybutnice said:

I've asked my financial advisor about this, and he insists that the government is highly unlikely to remove the 25% tax free we can obtain from our personal pension - in fact he said '97% it will not happen' - he also continued to say if it were to happen, the Government is already short on money so if everyone took out 25% of their tax free money to avoid this charge, there would be mayhem. 

He also explained that it's not like a rate increase which can be done immediately - so this has to be legally voted in. However in ChatGPT it says if it's voted through months later in the Finance Bill they could backdate it to budget day - so waiting until after the vote wouldn't help us as the date may already be locked in. Equally ChatGPT says they may announce the change from next tax year. 

Which is the truth?

Surely you have two sources of the truth.

Why would you ever doubt a financial advisor (why not ask an IFA?) or ChatGPT.

You just need to check with Rachel Reeves cleaner and you have the full set 😉

eskbanker

snootybutnice said:

He also explained that it's not like a rate increase which can be done immediately - so this has to be legally voted in. However in ChatGPT it says if it's voted through months later in the Finance Bill they could backdate it to budget day - so waiting until after the vote wouldn't help us as the date may already be locked in. Equally ChatGPT says they may announce the change from next tax year. 

Which is the truth?

They're not mutually exclusive - significant changes do require amended legislation but this could theoretically be retroactive.

snootybutnice said:

in fact he said '97% it will not happen'

Did you know that 82.3% of statistics are made up?

snootybutnice

I'd like to trust my financial advisor but a lot is at stake. I have just over £700K in my pension pot so if there is a possibility it is retroactive, then I stand to lose a lot if I go with his advice and "sit tight - do nothing - not likely to happen" - and added to which I wish to move to live in Cyprus next year, and become a Cyrpus tax resident which does impact tax as well. I'm trying to figure out whether to bite the bullet and take it out now (and have 4% early withdrawal charges), or leave it in until Feb next year when my early withdrawal charges go down to 3%. Generally what advice are others receiving from their financial advisors?

Baldytyke88

Many don't believe pensions are worthwhile now, so any tinkering with the 25% tax-free allowance would cause a collapse in the uptake of pensions, rendering them totally pointless.

Isthisforreal99

snootybutnice said:

I'd like to trust my financial advisor but a lot is at stake. I have just over £700K in my pension pot so if there is a possibility it is retroactive, then I stand to lose a lot if I go with his advice and "sit tight - do nothing - not likely to happen" - and added to which I wish to move to live in Cyprus next year, and become a Cyrpus tax resident which does impact tax as well. I'm trying to figure out whether to bite the bullet and take it out now (and have 4% early withdrawal charges), or leave it in until Feb next year when my early withdrawal charges go down to 3%. Generally what advice are others receiving from their financial advisors?

Unless anyone's FA has a hotline to the Chancellor then what advice can they realistically give?

If you want to panic like many did the last time then realised they had massively messed up by taking the tax free lump sum........

Sam_666

Here we go again. Just like last budget time, gossip and speculation post will become norm.
Boring. 

Baldytyke88

Sam_666 said:

Here we go again. Just like last budget time, gossip and speculation post will become norm.
Boring. 

It's months away, rather early for budget speculation?

Dazed_and_C0nfused

Baldytyke88 said:

Sam_666 said:

Here we go again. Just like last budget time, gossip and speculation post will become norm.
Boring. 

It's months away, rather early for budget speculation?

Only 79 sleeps to Budget day 🎅

Grumpy_chap

Generally it is not commonly recommended to take a decision on what might happen.

With reference to the OP's possible move to Cyprus and possibly drawing the 25% TFLS prior to the budget, is the OP of an age whereby they can access their pension without penalty?
If there were no Budget rumours, when would the OP be considering drawing the 25% TFLS?

snootybutnice

I’m 60 but there is a 4% early redemption penalty to pay this year which goes down to 3% next Feb if I want to draw on my pension. Once I move to Cyprus early next year, then I can’t have any amount tax-free as Cyprus will charge me tax on it. So the question is do I take it out before I go to Cyprus so it will be completely tax-free as the money I lose on the 4% early redemption will be far less than what I’d lose if I waited to take it out if I became a tax resident of Cyprus. So trying to decide should I wait till next February when I save 1 percent versus how much I could potentially lose by cashing in my 25% early.