Reducing window to draw pension income at basic rate

Alexland

ali_bear said:

Clearly taxes have to go up for everyone

Reading the budget and OBR report PDFs it's not clear to me why taxes needed to go up at all.

If certain taxes had gone down to stimulate growth (even if this required some spending restraint) then in future the country could afford to rebuild hospitals, schools, etc and be less dependant on 'the kindness of strangers' (including me as an IL gilt investor enjoying higher yields).

I'd have even been OK with them stopping the LISA bonus (despite having funded my account since launch to build a pot to give my kids for their deposits when I am 60) because it only seems to drive the prices of houses up so not a great use of government money.

Triumph13

It's definitely a feature rather than a bug.  HMG has no real interest in encouraging pension savings beyond what's needed to avoid paying them benefits.  At least it's a better system that the lifetime allowance was.

ali_bear

Probably of more significance is the effect on bond markets. Reassured that the UK will be paying its way in future the cost of government borrowing is set to come down. 

(This is important because of the huge amount of debt we already have and the continuing need to refinance that debt). 

poseidon1

ali_bear said:

Probably of more significance is the effect on bond markets. Reassured that the UK will be paying its way in future the cost of government borrowing is set to come down. 

(This is important because of the huge amount of debt we already have and the continuing need to refinance that debt). 

Yes, helpful to remind people of the big picture that UK is not self reliant and in the words of an ex Bank of England governor sometimes have to look to the ' kindness of strangers' to help prop it up.

Altior

ali_bear said:

Probably of more significance is the effect on bond markets. Reassured that the UK will be paying its way in future the cost of government borrowing is set to come down. 

(This is important because of the huge amount of debt we already have and the continuing need to refinance that debt). 

What does 'the UK will be paying its way' mean, specifically?

The huge amount of debt is being added to isn't it? Even based on the fantasy growth estimates and spending forecasts.

ali_bear

Well, hm. The opposite of Trussenomics, or not living on the never-never. Taking difficult decisions now for the longer term good. 

Nobody wants higher taxes, as has been pointed out it acts as a brake on growth and we badly need that. But it is necessary. 

Alexland

ali_bear said:

Probably of more significance is the effect on bond markets. Reassured that the UK will be paying its way in future the cost of government borrowing is set to come down. 

The bond markets were reassured by the increased headroom in the budget but when they think about if the government will realistically be able to progress the identified changes in later years and if you can even trust the chancellor or treasury sources to be truthful then my guess is they will like it less next week.

As an investor that now has a lot of money in IL gilts then I would have been more reassured that the country will eventually repay it's debts if they had gone for a low tax / high growth strategy rather than speeding up the doom loop. Still it doesn't matter that much as the BoE can just print money and drive inflation which is probably fine with me - it's the conventional gilt holders whose capital spending power seems most at risk.

Albermarle

Triumph13 said:

It's definitely a feature rather than a bug.  HMG has no real interest in encouraging pension savings beyond what's needed to avoid paying them benefits.  At least it's a better system that the lifetime allowance was.

Possibly a bit harsh.
I think the Govt is happy for people to have comfortable retirements, not just to avoid paying benefits.
Better off retirees will spend more, contribute to the economy, help their families, contribute more to society, be healthier/happier   etc. All good things any Govt would want.

Of course there is a limit as to how far  they will go when there is tax relief bill of £70 Billion a year, a lot of it paid to higher earners anyway .

TadleyBaggie

I'd been reducing my drawdown amount for a few years, to stay under the HRT point. This was mainly so I could take advantage the Marriage Allowance transfer from my wife who was getting less than her personal allowance. However in this tax year we canceled the MA as her state pension plus small civil service pension pushed her into paying tax for the first tine in 40 years. I suspect from next year I will have to bite the bullet and start paying HRT.

Triumph13

Albermarle said:

Triumph13 said:

It's definitely a feature rather than a bug.  HMG has no real interest in encouraging pension savings beyond what's needed to avoid paying them benefits.  At least it's a better system that the lifetime allowance was.

Possibly a bit harsh.
I think the Govt is happy for people to have comfortable retirements, not just to avoid paying benefits.
Better off retirees will spend more, contribute to the economy, help their families, contribute more to society, be healthier/happier   etc. All good things any Govt would want.

Of course there is a limit as to how far  they will go when there is tax relief bill of £70 Billion a year, a lot of it paid to higher earners anyway .

They're happy enough for people to have comfortable retirements, they just don't want to subsidize them. They'd much rather have the tax now rather than later.  If that means that high earners have to keep working (and paying taxes) for longer, then so much the better, because as far as economic growth and govt finances go that's a double win.  People like me that retire early are a drain on productivity and economic growth  

I recognise that it's fair that I get hit with 40% tax, after all the tax relief I got to help me along the way. If we can get back to a point where people know there is no point in putting too much into a pension in the first place, then that probably is better than giving the relief and taking it back via tax, years later.  Just so long as we can establish a culture that higher paid people also invest in GIAs.  From HMG's position the perfect outcome is that 'excess' retirement savings are unwrapped and it takes well paid people a little longer to get to FI.  The crucial thing is to manage that process such that they don't retire early in a huff instead - as happened with the LTA.