Tax Free Lump Sum and 2025 Budget

kinger101

Silvertabby said:

kinger101 said:

Cobbler_tone said:

There are a few more ‘sensible’ articles around as the budget approaches. A few things stand out and have been getting airtime.
Gambling tax, a levy on pension funds (e.g. 0.25% collected from the provider) and pushing out the freeze on the tax bands to 2030. I can see them scrapping stamp duty on cheaper properties to help first time buyers and try to get the housing market moving. Counter acted by a ‘mansion tax’. 

Not long to wait now and hopefully nothing to scupper anyone’s immediate plans.

Re, personal allowance, one issue they have with freezing it is that for 25/26 it will only just cover the new state pension.  Which means unless they want to create a compliance headache, they may actually have to start increasing the PA earlier than planned rather than extending it.  Which also means the triple lock could effectively decide what the allowance is each year.

Probably easier to copy the Tory pre-election pledge.  ie, increase the personal allowance for those over SPA, so it always exceeds the new single tier pension.

That said, the majority of State pensioners already pay income due to SERPS/occupational pension/both.

Makes sense.  The occupational schemes can be used to collect tax whereas SP doesn't.  That's the issue.  I expect compliance would be very poor for those relying solely on SP.

michaels

kinger101 said:

Silvertabby said:

kinger101 said:

Cobbler_tone said:

There are a few more ‘sensible’ articles around as the budget approaches. A few things stand out and have been getting airtime.
Gambling tax, a levy on pension funds (e.g. 0.25% collected from the provider) and pushing out the freeze on the tax bands to 2030. I can see them scrapping stamp duty on cheaper properties to help first time buyers and try to get the housing market moving. Counter acted by a ‘mansion tax’. 

Not long to wait now and hopefully nothing to scupper anyone’s immediate plans.

Re, personal allowance, one issue they have with freezing it is that for 25/26 it will only just cover the new state pension.  Which means unless they want to create a compliance headache, they may actually have to start increasing the PA earlier than planned rather than extending it.  Which also means the triple lock could effectively decide what the allowance is each year.

Probably easier to copy the Tory pre-election pledge.  ie, increase the personal allowance for those over SPA, so it always exceeds the new single tier pension.

That said, the majority of State pensioners already pay income due to SERPS/occupational pension/both.

Makes sense.  The occupational schemes can be used to collect tax whereas SP doesn't.  That's the issue.  I expect compliance would be very poor for those relying solely on SP.

They could make a deduction 'at source' from the state pension but the optics wouldn't look great - especially if pension credit then exceeded after tax state pension

marathonic

michaels said:

Cobbler_tone said:

There are a few more ‘sensible’ articles around as the budget approaches. A few things stand out and have been getting airtime.
Gambling tax, a levy on pension funds (e.g. 0.25% collected from the provider) and pushing out the freeze on the tax bands to 2030. I can see them scrapping stamp duty on cheaper properties to help first time buyers and try to get the housing market moving. Counter acted by a ‘mansion tax’. 

Not long to wait now and hopefully nothing to scupper anyone’s immediate plans.

Can you say more about this levy on pensions - is it one off confiscation of a fraction of everyone's pension pot or an annual take?  How will it apply to DB pensions?

Ireland had a pension levy from 2011 to 2015. It was an annual charge on the total value of assets within the pension and was charged at:

0.6% for 2011-2013

0.75% for 2014

0.15% for 2015.

It was discontinued for 2016 onwards. Hopefully they don't go this route as it would be a significant cost for many. It would face a lot more backlash than some of the other options being considered.

Silvertabby

kinger101 said:

Silvertabby said:

kinger101 said:

Cobbler_tone said:

There are a few more ‘sensible’ articles around as the budget approaches. A few things stand out and have been getting airtime.
Gambling tax, a levy on pension funds (e.g. 0.25% collected from the provider) and pushing out the freeze on the tax bands to 2030. I can see them scrapping stamp duty on cheaper properties to help first time buyers and try to get the housing market moving. Counter acted by a ‘mansion tax’. 

Not long to wait now and hopefully nothing to scupper anyone’s immediate plans.

Re, personal allowance, one issue they have with freezing it is that for 25/26 it will only just cover the new state pension.  Which means unless they want to create a compliance headache, they may actually have to start increasing the PA earlier than planned rather than extending it.  Which also means the triple lock could effectively decide what the allowance is each year.

Probably easier to copy the Tory pre-election pledge.  ie, increase the personal allowance for those over SPA, so it always exceeds the new single tier pension.

That said, the majority of State pensioners already pay income due to SERPS/occupational pension/both.

Makes sense.  The occupational schemes can be used to collect tax whereas SP doesn't.  That's the issue.  I expect compliance would be very poor for those relying solely on SP.

Those on just the State pension plus SERPS/SP2 receive an annual simple assessment tax demand,  to be paid within 3 months.  A simple system that has worked for years - presumably because those involved are used to  putting a little away each month in anticipation of the bill.

But once those on just the single tier pension are dragged into tax paying territory (2027?) I suspect that those bills will be more of a political issue than fiscal.  

michaels

marathonic said:

michaels said:

Cobbler_tone said:

There are a few more ‘sensible’ articles around as the budget approaches. A few things stand out and have been getting airtime.
Gambling tax, a levy on pension funds (e.g. 0.25% collected from the provider) and pushing out the freeze on the tax bands to 2030. I can see them scrapping stamp duty on cheaper properties to help first time buyers and try to get the housing market moving. Counter acted by a ‘mansion tax’. 

Not long to wait now and hopefully nothing to scupper anyone’s immediate plans.

Can you say more about this levy on pensions - is it one off confiscation of a fraction of everyone's pension pot or an annual take?  How will it apply to DB pensions?

Ireland had a pension levy from 2011 to 2015. It was an annual charge on the total value of assets within the pension and was charged at:

0.6% for 2011-2013

0.75% for 2014

0.15% for 2015.

It was discontinued for 2016 onwards. Hopefully they don't go this route as it would be a significant cost for many. It would face a lot more backlash than some of the other options being considered.

Seems a bit odd to hand out tax breaks for pension saving with one hand and then confiscate pensions with the other.  Presumably though the win is that public sector DB pensions can be left alone....

Aretnap

michaels said:

marathonic said:

michaels said:

Cobbler_tone said:

There are a few more ‘sensible’ articles around as the budget approaches. A few things stand out and have been getting airtime.
Gambling tax, a levy on pension funds (e.g. 0.25% collected from the provider) and pushing out the freeze on the tax bands to 2030. I can see them scrapping stamp duty on cheaper properties to help first time buyers and try to get the housing market moving. Counter acted by a ‘mansion tax’. 

Not long to wait now and hopefully nothing to scupper anyone’s immediate plans.

Can you say more about this levy on pensions - is it one off confiscation of a fraction of everyone's pension pot or an annual take?  How will it apply to DB pensions?

Ireland had a pension levy from 2011 to 2015. It was an annual charge on the total value of assets within the pension and was charged at:

0.6% for 2011-2013

0.75% for 2014

0.15% for 2015.

It was discontinued for 2016 onwards. Hopefully they don't go this route as it would be a significant cost for many. It would face a lot more backlash than some of the other options being considered.

Seems a bit odd to hand out tax breaks for pension saving with one hand and then confiscate pensions with the other.  

Hardly confiscation. Pension providers already pay plenty of taxes, which like all taxes levied on businesses are ultimately paid by the consumer. Is all that corporation tax paid by Hargreves Landsdown confiscation of pensions as well?

The proposal seems to be for a tax which would be paid by the pension companies as a small percentage of their assets under management. It would be sold as a tax on the pension providers rather than on pension savers as it would not be paid directly from your pension fund, and in theory the pension providers could choose to absorb the cost of paying it. In practice of course most or all of it would be passed on to the customer in the form of higher fees.

OTOH if it was set at a level in the region of 0.25% the end result would be that average fees on pensions would revert to where they were just a few years ago - not ideal, but hardly catastrophic either. I can see it provoking much less of a backlash that a lot of tax rises that might be considered.

Aretnap

kinger101 said:

Silvertabby said:

kinger101 said:

Cobbler_tone said:

There are a few more ‘sensible’ articles around as the budget approaches. A few things stand out and have been getting airtime.
Gambling tax, a levy on pension funds (e.g. 0.25% collected from the provider) and pushing out the freeze on the tax bands to 2030. I can see them scrapping stamp duty on cheaper properties to help first time buyers and try to get the housing market moving. Counter acted by a ‘mansion tax’. 

Not long to wait now and hopefully nothing to scupper anyone’s immediate plans.

Re, personal allowance, one issue they have with freezing it is that for 25/26 it will only just cover the new state pension.  Which means unless they want to create a compliance headache, they may actually have to start increasing the PA earlier than planned rather than extending it.  Which also means the triple lock could effectively decide what the allowance is each year.

Probably easier to copy the Tory pre-election pledge.  ie, increase the personal allowance for those over SPA, so it always exceeds the new single tier pension.

That said, the majority of State pensioners already pay income due to SERPS/occupational pension/both.

Makes sense.  The occupational schemes can be used to collect tax whereas SP doesn't.  That's the issue.  I expect compliance would be very poor for those relying solely on SP.

What's the compliance rate like now for the significant number of people whose state pension already exceeds the personal allowance? (Genuine question, I have no idea?)

In one sense it doesn't really matter what the compliance rate is like at first at least because the amounts of money involved will be trivial. If the new state pension ends up being a few hundred pounds over the personal allowance you'd be taking about maybe four million people owing maybe a hundred pounds in tax each. Even if the compliance rate was zero it would be a rounding error in the context of government finances, and the pragmatic thing to do would be not to enforce it particularly vigorously. Eventually it would become a significant amount of money of course, but that would take a good few years - maybe even enough time to build an IT system which allowed tax to be deducted at source from the state pension.

michaels

Aretnap said:

michaels said:

marathonic said:

michaels said:

Cobbler_tone said:

There are a few more ‘sensible’ articles around as the budget approaches. A few things stand out and have been getting airtime.
Gambling tax, a levy on pension funds (e.g. 0.25% collected from the provider) and pushing out the freeze on the tax bands to 2030. I can see them scrapping stamp duty on cheaper properties to help first time buyers and try to get the housing market moving. Counter acted by a ‘mansion tax’. 

Not long to wait now and hopefully nothing to scupper anyone’s immediate plans.

Can you say more about this levy on pensions - is it one off confiscation of a fraction of everyone's pension pot or an annual take?  How will it apply to DB pensions?

Ireland had a pension levy from 2011 to 2015. It was an annual charge on the total value of assets within the pension and was charged at:

0.6% for 2011-2013

0.75% for 2014

0.15% for 2015.

It was discontinued for 2016 onwards. Hopefully they don't go this route as it would be a significant cost for many. It would face a lot more backlash than some of the other options being considered.

Seems a bit odd to hand out tax breaks for pension saving with one hand and then confiscate pensions with the other.  

Hardly confiscation. Pension providers already pay plenty of taxes, which like all taxes levied on businesses are ultimately paid by the consumer. Is all that corporation tax paid by Hargreves Landsdown confiscation of pensions as well?

The proposal seems to be for a tax which would be paid by the pension companies as a small percentage of their assets under management. It would be sold as a tax on the pension providers rather than on pension savers as it would not be paid directly from your pension fund, and in theory the pension providers could choose to absorb the cost of paying it. In practice of course most or all of it would be passed on to the customer in the form of higher fees.

OTOH if it was set at a level in the region of 0.25% the end result would be that average fees on pensions would revert to where they were just a few years ago - not ideal, but hardly catastrophic either. I can see it provoking much less of a backlash that a lot of tax rises that might be considered.

I thought the SWR was impacted pretty much 1:1 by the level of fees charged - so that would bring the UK SWR down from say 3.25% to 3% or reduce the pension of someone with a 500k pot from £16,250 to £15,000 - or £1250 per year for life, equivalent to increasing basic rate tax for said pensioner from 20% to 53% - and that is only the impact during drawdown, the tax take during accumulation will further 'compound down' the value of the pot on retirement.

But clearly not many will understand the impact so a great stealth tax.

ukdw

Aretnap said:

michaels said:

marathonic said:

michaels said:

Cobbler_tone said:

There are a few more ‘sensible’ articles around as the budget approaches. A few things stand out and have been getting airtime.
Gambling tax, a levy on pension funds (e.g. 0.25% collected from the provider) and pushing out the freeze on the tax bands to 2030. I can see them scrapping stamp duty on cheaper properties to help first time buyers and try to get the housing market moving. Counter acted by a ‘mansion tax’. 

Not long to wait now and hopefully nothing to scupper anyone’s immediate plans.

Can you say more about this levy on pensions - is it one off confiscation of a fraction of everyone's pension pot or an annual take?  How will it apply to DB pensions?

Ireland had a pension levy from 2011 to 2015. It was an annual charge on the total value of assets within the pension and was charged at:

0.6% for 2011-2013

0.75% for 2014

0.15% for 2015.

It was discontinued for 2016 onwards. Hopefully they don't go this route as it would be a significant cost for many. It would face a lot more backlash than some of the other options being considered.

Seems a bit odd to hand out tax breaks for pension saving with one hand and then confiscate pensions with the other.  

Hardly confiscation. Pension providers already pay plenty of taxes, which like all taxes levied on businesses are ultimately paid by the consumer. Is all that corporation tax paid by Hargreves Landsdown confiscation of pensions as well?

The proposal seems to be for a tax which would be paid by the pension companies as a small percentage of their assets under management. It would be sold as a tax on the pension providers rather than on pension savers as it would not be paid directly from your pension fund, and in theory the pension providers could choose to absorb the cost of paying it. In practice of course most or all of it would be passed on to the customer in the form of higher fees.

OTOH if it was set at a level in the region of 0.25% the end result would be that average fees on pensions would revert to where they were just a few years ago - not ideal, but hardly catastrophic either. I can see it provoking much less of a backlash that a lot of tax rises that might be considered.

If the total assets of all DC pension funds is £267 billion - according to this article
https://www.thepensionsregulator.gov.uk/en/document-library/research-and-analysis/occupational-defined-contribution-landscape-2024

Then 0.25% of this is I think only about £660 million -  I think if they are going to do something as unpopular as putting extra charges on DC pensions then they are going to want a raise a lot more cash than that.

RogerPensionGuy

ukdw said:

Aretnap said:

michaels said:

marathonic said:

michaels said:

Cobbler_tone said:

There are a few more ‘sensible’ articles around as the budget approaches. A few things stand out and have been getting airtime.
Gambling tax, a levy on pension funds (e.g. 0.25% collected from the provider) and pushing out the freeze on the tax bands to 2030. I can see them scrapping stamp duty on cheaper properties to help first time buyers and try to get the housing market moving. Counter acted by a ‘mansion tax’. 

Not long to wait now and hopefully nothing to scupper anyone’s immediate plans.

Can you say more about this levy on pensions - is it one off confiscation of a fraction of everyone's pension pot or an annual take?  How will it apply to DB pensions?

Ireland had a pension levy from 2011 to 2015. It was an annual charge on the total value of assets within the pension and was charged at:

0.6% for 2011-2013

0.75% for 2014

0.15% for 2015.

It was discontinued for 2016 onwards. Hopefully they don't go this route as it would be a significant cost for many. It would face a lot more backlash than some of the other options being considered.

Seems a bit odd to hand out tax breaks for pension saving with one hand and then confiscate pensions with the other.  

Hardly confiscation. Pension providers already pay plenty of taxes, which like all taxes levied on businesses are ultimately paid by the consumer. Is all that corporation tax paid by Hargreves Landsdown confiscation of pensions as well?

The proposal seems to be for a tax which would be paid by the pension companies as a small percentage of their assets under management. It would be sold as a tax on the pension providers rather than on pension savers as it would not be paid directly from your pension fund, and in theory the pension providers could choose to absorb the cost of paying it. In practice of course most or all of it would be passed on to the customer in the form of higher fees.

OTOH if it was set at a level in the region of 0.25% the end result would be that average fees on pensions would revert to where they were just a few years ago - not ideal, but hardly catastrophic either. I can see it provoking much less of a backlash that a lot of tax rises that might be considered.

If the total assets of all DC pension funds is £267 billion - according to this article
https://www.thepensionsregulator.gov.uk/en/document-library/research-and-analysis/occupational-defined-contribution-landscape-2024

Then 0.25% of this is I think only about £660 million -  I think if they are going to do something as unpopular as putting extra charges on DC pensions then they are going to want a raise a lot more cash than that.

660M is a start, due the demise of DB schemes, DC pots will hopefully climb & climb, every year locked in. 

A nice low hanging fruit that will go very largely unnoticed and gets bigger every year, yes please I suspect. 

And I'm sure we won't notice 0.25% roll up to just 0.35% 0.40% and it's PR effect will be zero, we just look back how the LTA of 1.8M to 1M, CGT from 12.3K to 3K, divvy and CGT rates getting pushed up was it 20% or 25%

These low hanging fruits are just too easy(ref PR) and simple, so indeed we will probably see stuff like this the next few budgets I guess.