The inevitable pre-budget speculation on pensions

aroominyork

Thanks for your 'thanks' on my 2.22pm post, @RogerPensionGuy, but please do comment. I'm sure you can throw extra light on this!

RogerPensionGuy

aroominyork said:

Thanks for your 'thanks' on my 2.22pm post, @RogerPensionGuy, but please do comment. I'm sure you can throw extra light on this!

Looks like plenty of options and different cash flows and possibilities etc. 

Reference IHT, I'm not much interested to a lesser extent and with moving goalposts I'm glad I'm not much interested. 

I have a always tried not being  influenced by the tax tail wagging the dog to an extent.

Age 75 cliff edge, owning a house or not ref IHT & NRB etc etc us just too many obstacles. 

I've often read comfort people have many & various cash flows to use and this allows nice choices. 

So I'm just looking at a few simple easy to manage cash flows at plus 60 years old. 

Defined Pension, SIPP, State Pension, Annuities(2 or 3) Premium Bonds, Gilts, ISAs, a simple GIA(possibly just Inc units) and a chunk of liquid cash in a mini cash ISA.

Not being concerned about IHT has made my choices more simple, I was going to keep the SIPP as a long term storage pot for IHT housekeeping, but that is soon history and I'm venting SIPP accordingly. 

aroominyork

While I take a week or two to decide whether to take my full TFLS/PCLS before the budget, and given it can take a few weeks for Interactive Investor to set it up (and they may have a backlog...), is there anything to be lost be asking them now to prep my SIPP for drawdown? Presumably I will not be committed to making any withdrawals?

RogerPensionGuy

aroominyork said:

While I take a week or two to decide whether to take my full TFLS/PCLS before the budget, and given it can take a few weeks for Interactive Investor to set it up (and they may have a backlog...), is there anything to be lost be asking them now to prep my SIPP for drawdown? Presumably I will not be committed to making any withdrawals?

Just for information I'm in the process of also wolfing out the remaining 268K allowance due lack of confidence, however also on the edge of buying an annuity or two, so don't want to use any uncrystallised funds to buy annuities. 

The platform advised me that X 3 of the tax free removed will go in to a new pot/bucket and be crystallised and think they called it drawdown.

They asked if I wanted all my uncrystallised funds put in the new bucket as I'll of used the maximum tax free and it will look nicer, I said no thanks just in case that 268K ever increased, they agreed why move it unless required, I'm 99% sure that 268K will never be increased, but who knows. 

So my understanding is that X 3 amount will be in a drawdown pot and easy quick to start drawing if I like.

Of slight interest this platform insurance company won't give annuity quotes until that tax free removed.

aroominyork

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.

BlackKnightMonty

ClashCityRocker1 said:

I think fiscal drag WILL serve most of the Government's taxation needs. The rest is keeping their nerve as we work through global issues. 

But I am not sure the Government will keep their nerve!

I think there is a case for reworking the whole income tax/NI system - probably taxing wealthy pensioners a bit more. But it would be a brave chancellor who did so, especially after saying they wouldn't.

The tax base needs to broaden (imho) so that a majority of house holds are net contributors. A combination of increased low and income tax rate, combined with welfare  reductions is long overdue.

RogerPensionGuy

The current tax system and all its levers make it veet nice to pull & tweek, very convenient for any government. 

Many times its been said just apply a single tax like 20 or 25% and adjust via personal allowances, people could plan better and I personally like the idea of a few single tax % nets, simple to understand and hopefully reducing all the various cliff edges that stiffle our economy. 

However I'm guessing taxes will be just made more awkward as time rolls on and the effects will be a bigger tax take and more government jobs ensuring tax recoveries just go up. 

norm_

In the event 40% tax relief is cut from pension contributions, would that apply from the next tax year?

How would it work if people had already contributed this year?

HedgehogRulez

norm_ said:

In the event 40% tax relief is cut from pension contributions, would that apply from the next tax year?

How would it work if people had already contributed this year?

What a weird thing to ask. If it happens (massively unlikely) you’d have to see what they’ve proposed. How would anyone here know? 🤷‍♂️

hugheskevi

norm_ said:

In the event 40% tax relief is cut from pension contributions, would that apply from the next tax year?

How would it work if people had already contributed this year?

Unless you exclude Defined Benefit pension schemes, and probably delay how employer contributions and salary sacrifice are treated within the calculations, policy development, legislation, and implementation will take a lot longer than April 2026. 

To have some anti-forestalling legislation to take immediate effect would further complicate things unless that was aimed solely at those with the highest incomes, almost certainly £100,000 plus as a minimum.