Pensions and the budget.

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Discussion

Ozzie Osmond

Original Poster:

21,189 posts

247 months

Friday 1st March 2013
quotequote all
Last year George Osborne announced a further cut in the pensions Lifetime Allowance taking effect from 5 April 2013.

It was previously £1.8m, then £1.5m and will reduce to £1.25m. This is roughly eqivalent to a maximum pension of £50,000 p.a. obtainable with full tax relief on contributions.

Depending on how much you earn, the government is currently contributing 50%, 40% or 20% towards your pension. The higher your earnings, the more help you get from the government.

Can this survive the Chancellor's Budget on 21 March?

FiF

44,174 posts

252 months

Friday 1st March 2013
quotequote all
Can what survive? Continuation of relief at the marginal tax rate?

Possibly not seeing as Call Me Dave has a death wish.

RealSquirrels

11,327 posts

193 months

Friday 1st March 2013
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is tax relief really a contribution? I wouldn't call it that.

It's a bit of a joke, it's the government deciding that it needs more of our money and effectively increasing tax rates. good one.

Ozzie Osmond

Original Poster:

21,189 posts

247 months

Friday 1st March 2013
quotequote all
FiF said:
Call Me Dave has a death wish.
I think you're onto something there!

anonymous-user

55 months

Friday 1st March 2013
quotequote all
Ozzie Osmond said:
Last year George Osborne announced a further cut in the pensions Lifetime Allowance taking effect from 5 April 2013.

It was previously £1.8m, then £1.5m and will reduce to £1.25m. This is roughly eqivalent to a maximum pension of £50,000 p.a. obtainable with full tax relief on contributions.

Depending on how much you earn, the government is currently contributing 50%, 40% or 20% towards your pension. The higher your earnings, the more help you get from the government.

Can this survive the Chancellor's Budget on 21 March?
The government doesn't contribute anything to pensions. At all. At best tax is delayed and then any remaining fund is stolen by the Government on death.


Ozzie Osmond

Original Poster:

21,189 posts

247 months

Saturday 2nd March 2013
quotequote all
REALIST123 said:
The government doesn't contribute anything to pensions. At all. At best tax is delayed and then any remaining fund is stolen by the Government on death.
I take it you have no pension provision then? Well guess what.

Assume for the sake of argument someone earning £50,000 a year.
  • Gets 40% tax relief on pension contributions. Every £600 he puts in is matched by £400 from the government.
  • Investment returns are not taxed and money grosses up tax free within the pension plan.
  • Retires at 60 and draws out 25% of the pension plan value completely free of all tax.
  • Draws pension of, say, £20,000 a year which is only taxed at 20% (compared with 40% relief on the contributions paid in - so that's a straight profit of the 20%)
People who say it's not worth doing a pension are nuts.

PS If you don't have a pension I hope you're not ignoring ISA as well.



davepoth

29,395 posts

200 months

Saturday 2nd March 2013
quotequote all
Ozzie Osmond said:
REALIST123 said:
The government doesn't contribute anything to pensions. At all. At best tax is delayed and then any remaining fund is stolen by the Government on death.
I take it you have no pension provision then? Well guess what.

Assume for the sake of argument someone earning £50,000 a year.
  • Gets 40% tax relief on pension contributions. Every £600 he puts in is matched by £400 from the government.
  • Investment returns are not taxed and money grosses up tax free within the pension plan.
  • Retires at 60 and draws out 25% of the pension plan value completely free of all tax.
  • Draws pension of, say, £20,000 a year which is only taxed at 20% (compared with 40% relief on the contributions paid in - so that's a straight profit of the 20%)
People who say it's not worth doing a pension are nuts.

PS If you don't have a pension I hope you're not ignoring ISA as well.
For higher rate payers maybe. Do those maths again for someone earning around £22k and see where it gets you.

sidicks

25,218 posts

222 months

Saturday 2nd March 2013
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davepoth said:
For higher rate payers maybe. Do those maths again for someone earning around £22k and see where it gets you.
Well:

They still get tax relief on the way in (at basic rate)
And they still get 25% tax free cash at retirement
And much / most of their pension will not be subject to tax

smile

RealSquirrels

11,327 posts

193 months

Saturday 2nd March 2013
quotequote all
the government doesn't match anything when you pay into a pension, it just doesn't take your money away from you.

FiF

44,174 posts

252 months

Saturday 2nd March 2013
quotequote all
true, but if you don't pay into a pension then you don't have a pension and the Govt takes the money. lose-lose

RealSquirrels

11,327 posts

193 months

Saturday 2nd March 2013
quotequote all
i totally agree, I just resent the tax relief on pensions being termed a 'contribution' from the government.

FiF

44,174 posts

252 months

Saturday 2nd March 2013
quotequote all
again agree, I think the term panders to the part of the public that only think in terms of take home pay, deductions being one of those bits of the slip that are avoided.

In other words it only costs you £600 off the bottom line, but effectively £1000 is what goes into the pension. The fact that the £1000 was yours in the first place is glossed over as a sales pitch, for want of a better expression.

audidoody

8,597 posts

257 months

Saturday 2nd March 2013
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Ozzie Osmond said:
People who say it's not worth doing a pension are nuts.
I received a letter last April notifying me my £220,000 pension fund is on target to pay £9,000 gross a year. Which is odd, as the nice man who sold it to me in 1995 said I could be guaranteed at least 10 per cent a year of the fund. Let the good times roll.

sidicks

25,218 posts

222 months

Saturday 2nd March 2013
quotequote all
audidoody said:
I received a letter last April notifying me my £220,000 pension fund is on target to pay £9,000 gross a year. Which is odd, as the nice man who sold it to me in 1995 said I could be guaranteed at least 10 per cent a year of the fund. Let the good times roll.
And remind me what interest rates where when you bought the pension and what they are now.

Oh and what about life expectancy....??

Or inflation?
frown

audidoody

8,597 posts

257 months

Saturday 2nd March 2013
quotequote all
Ozzie Osmond said:
People who say it's not worth doing a pension are nuts.
I received a letter last April notifying me my £220,000 pension fund is on target to pay £9,000 gross a year. Which is odd, as the nice man who sold it to me in 1995 said I could be guaranteed at least 10 per cent a year of the fund. Let the good times roll.

audidoody

8,597 posts

257 months

Saturday 2nd March 2013
quotequote all
Ozzie Osmond said:
People who say it's not worth doing a pension are nuts.
I received a letter last April notifying me my £220,000 pension fund is on target to pay £9,000 gross a year. Which is odd, as the nice man who sold it to me in 1995 said I could be guaranteed at least 10 per cent a year of the fund. Let the good times roll.

JDRoest

1,126 posts

151 months

Sunday 3rd March 2013
quotequote all
Ozzie Osmond said:
I take it you have no pension provision then? Well guess what.

Assume for the sake of argument someone earning £50,000 a year.
  • Gets 40% tax relief on pension contributions. Every £600 he puts in is matched by £400 from the government.
  • Investment returns are not taxed and money grosses up tax free within the pension plan.
  • Retires at 60 and draws out 25% of the pension plan value completely free of all tax.
  • Draws pension of, say, £20,000 a year which is only taxed at 20% (compared with 40% relief on the contributions paid in - so that's a straight profit of the 20%)
People who say it's not worth doing a pension are nuts.

PS If you don't have a pension I hope you're not ignoring ISA as well.
I don't have a pension and certainly not about to start one. Anything the Govt gives you will be taken away from you. Money that you don't have direct control over will be subject to an ever changing set of demands from Govt as demonstrated by the current situation.

Anything you tie up in a pension will eventually be plundered for future Govt spending.

AnonSpoilsport

12,955 posts

177 months

Sunday 3rd March 2013
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audidoody said:
I received a letter last April notifying me my £220,000 pension fund is on target to pay £9,000 gross a year. Which is odd, as the nice man who sold it to me in 1995 said I could be guaranteed at least 10 per cent a year of the fund. Let the good times roll.
You should count yourself lucky that you have three pensions to come....

ringram

14,700 posts

249 months

Sunday 3rd March 2013
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anonymous said:
[redacted]
It seems it does but only if you use wonky maths...

http://www.telegraph.co.uk/finance/personalfinance...

Under new tax-free limits announced in the Autumn Statement, workers with gold-plated final salary pensions can get an inflation-linked income of up to £62,500 a year before they have to pay tax on their pension pot. But a saver in a defined contribution pension scheme could get an index-linked pension of just £35,000 before having to pay tax.

ringram

14,700 posts

249 months

Sunday 3rd March 2013
quotequote all
I wonder if there is a claim under article 14 of the european convention for human rights act for discrimination due to the status of public sector workers in relation to their personal security!? (protected in article 6)

Worth a crack Id say.