The inevitable pre-budget speculation on pensions

wjr4

aroominyork said:

I'm surprised any company will not give annuity quotes until you have crystallised funds. Surely the decision to crystallise partly depends on having an annuity quote you want to take up; if you don't like the annuity quotes you might crystallise less, eg using UFPLS.

That isn’t the case at all? 

ukdw

Re the latest speculation relating to increasing the basic rate of income tax from 20% to 22%.

If no other allowances change - then thinking about this from people taking a range of net pensions.

2% doesn't sound that much - but it is a 10% increase.

If my calculations are correct, then for someone currently on £25k net - they will lose £311 in extra tax if they don't increase their level of drawdown.   To get back to £25k they would need to increase drawdown by £398 gross (from £28,108 to £28,506).

At the other end of the 20% scale.  Someone currently on £42.7k net - would lose £753 if they leave their gross at £50,233.   To get that £753 back - they would need to push their gross up into the 40% band - by £1,244 I think (from £50,233 to £51,477).

What are you going to do if it happens - the choices seem to be:

1. Leave current gross drawdown level  as is, pay more tax and get less income.

2. Increase drawdown to get the same income back and pay even more tax.

3. Lower drawdown amounts - to pay the same or less tax, and accept an even lower income.

I will probably just leave my drawdown untouched and accept the extra tax hit and income loss.

Cobbler_tone

2% on tax, 2% off NI. Not forgetting the 0.25% levy on funds and some kind of reduction on relief going in. A 'medium/high probability' anyway according to the BDO. Gone a bit quiet on the TFLS, which should keep many happy, as that seems their main focus.

RogerPensionGuy

One article I read said for every 1% extra applied to the 20% income tax produces 8 billion pounds and every 1% extra applied to 40% produces just 2 billion pounds.

If the black hole needs filling and a sensible fiscal headroom is to be achieved, it will need realistically an income tax rise and many smaller levers to be pulled. 

If unpopular choices are not made and inacted now, the next few budgets will become even more problematic for any government. 

My spare room is now fully stocked up with coke and popcorn for the event. 

Universidad

Cobbler_tone said:

2% on tax, 2% off NI. 

This would be a sensible start to taxing pensioner income more in line with working folk. Perhaps it would be done in small steps like this to test the water. I'm imagining some of the headlines already. (Awarding myself bonus points for headlines in the style of each paper...)

DRS1

Universidad said:

Cobbler_tone said:

2% on tax, 2% off NI. 

This would be a sensible start to taxing pensioner income more in line with working folk. Perhaps it would be done in small steps like this to test the water. I'm imagining some of the headlines already. (Awarding myself bonus points for headlines in the style of each paper...)

My crystal ball tells me that the end of this road is the abolition of all NICs.  The consequence of which is no-one pays any NICs and consequently no-one qualifies for any state pension.  Bye bye black hole.

Andy_L

RogerPensionGuy said:

One article I read said for every 1% extra applied to the 20% income tax produces 8 billion pounds and every 1% extra applied to 40% produces just 2 billion pounds.

If the black hole needs filling and a sensible fiscal headroom is to be achieved, it will need realistically an income tax rise and many smaller levers to be pulled. 

If unpopular choices are not made and inacted now, the next few budgets will become even more problematic for any government. 

My spare room is now fully stocked up with coke and popcorn for the event. 

Well there's a lot more basic rate taxpayers than higher rate



 https://www.gov.uk/government/statistics/direct-effects-of-illustrative-tax-changes/direct-effects-of-illustrative-tax-changes-bulletin-january-2025#income-tax-rates

leosayer

Universidad said:

Cobbler_tone said:

2% on tax, 2% off NI. 

This would be a sensible start to taxing pensioner income more in line with working folk. Perhaps it would be done in small steps like this to test the water. I'm imagining some of the headlines already. (Awarding myself bonus points for headlines in the style of each paper...)

Many pensioners also get a salary from work, so this would be an income tax increase on working people.

LHW99

Wouldn't moving the 2p from NI to income tax also catch a number people who do several lower paid / part time jobs, each of which are under the minimum salary to pay NI?

westv

Only 26 days left now for speculation...
....... and 27 days before it starts up again.