Crystal ball - labour and LTA
Discussion
Whatever your political persuasion it is possible that we will have a new government this time next year
As a public sector sciver this is purely hypothetical but as Labour have been mostly evasive on the issue of pension LTA tweaks I still think it probable/reasonable that they will give it a haircut if/when they get into power
Any guesses as to how this will look?
Surely there will be an amnesty period, or will they slash it back to last years level ASAP?
Radical change will probably require notice - or am I being naive?
Cheers
I thought that they had been quite vocal in stating they would re-apply the LTA but would ensure high paid civil servants and party members (like Starmer already has) wont be penalised.
Will be very frustrating though I have not yet reached and don't expect to ever reach the LTA due to tapering so I can save bugger all into a pension anyway unless I change career to be in the NHS or a senior labour party member.
Will be very frustrating though I have not yet reached and don't expect to ever reach the LTA due to tapering so I can save bugger all into a pension anyway unless I change career to be in the NHS or a senior labour party member.
They announced the same day the LTA was abolished that they would reverse it but you would expect nothing less.
In reality since then not a lot has been mentioned by them other than trying to look after particularly Doctors.
However it has to be an easy target and for others not affected there wont be much sympathy from them so in the scheme of how they need to raise money presumably fairly easy although I know not how much money just could be raised in this way ?
I would guess contributions and tax relief will get adjusted and some form of reintroduction of the LTA will also happen although from what date and whether inflation adjusted who knows ?
I also think at the same time they might well look at the 25% tfc.
There is a fair amount of work being done by various FA's to see whether therefore looking at your own circumstances now if potentially affected might be sensible.
In reality since then not a lot has been mentioned by them other than trying to look after particularly Doctors.
However it has to be an easy target and for others not affected there wont be much sympathy from them so in the scheme of how they need to raise money presumably fairly easy although I know not how much money just could be raised in this way ?
I would guess contributions and tax relief will get adjusted and some form of reintroduction of the LTA will also happen although from what date and whether inflation adjusted who knows ?
I also think at the same time they might well look at the 25% tfc.
There is a fair amount of work being done by various FA's to see whether therefore looking at your own circumstances now if potentially affected might be sensible.
I wonder how much there is tied up in un-realised 25% portions of pensions in the current over 55 cohort in UK today ? Can you imagine the run on that if there was a serious intention ( not immediate legislation ) to scrap that .
Also, if such run on pension funds ( and lets face it most is in some form of equities ) happened , surely this massive sell off would make a market shudder.
I for one would start taking my DB and the 25% and my 3 DC/SIPP pensions that I had no intention of touching for foreseeable future. Early retiree living off savings that are not in any tax shelter ( interest is effectively non taxed due to zero relevant earnings )
So for me personally : even mention the term "25%" has my instant attention
Also, if such run on pension funds ( and lets face it most is in some form of equities ) happened , surely this massive sell off would make a market shudder.
I for one would start taking my DB and the 25% and my 3 DC/SIPP pensions that I had no intention of touching for foreseeable future. Early retiree living off savings that are not in any tax shelter ( interest is effectively non taxed due to zero relevant earnings )
So for me personally : even mention the term "25%" has my instant attention
PM3 said:
I Can you imagine the run on that if there was a serious intention ( not immediate legislation ) to scrap that .
Also, if such run on pension funds ( and lets face it most is in some form of equities ) happened , surely this massive sell off would make a market shudder.
Quite agree what potential unintended consequences there could be but still doesn't mean they would do nothing.Also, if such run on pension funds ( and lets face it most is in some form of equities ) happened , surely this massive sell off would make a market shudder.
My concern would be more about not doing something now to in effect " protect " what the LTA abolition has done in terms of future tax savings.
Also I guess its possible that whatever Labour announces could take effect immediately ie during the tax year ( although isn't that retrospective ?) ?
I am looking into the ability / benefits of taking the balance of my available 25% thus in effect crystallizing one of my pots and passing the money now to my children in order to assist house deposits etc.
watching this closely.
Previously the tories have changed the annual allowance and lifetime allowance (LTA) , but never retrospectively. Pensions person at work pointed out how long it took to introduce the legislation for removing the LTA .. so removing overnight might not be practically possible.
If they did introduce exemptions for judges / doctors expect a lot of legal action .. which would delay any change. Can they legally prefer one group of workers vs another ?
Previously the tories have changed the annual allowance and lifetime allowance (LTA) , but never retrospectively. Pensions person at work pointed out how long it took to introduce the legislation for removing the LTA .. so removing overnight might not be practically possible.
If they did introduce exemptions for judges / doctors expect a lot of legal action .. which would delay any change. Can they legally prefer one group of workers vs another ?
When labour announced that they would immediately re introduce the LTA if they won the next election the pensions industry told them that by doing that they would probably kill the NHS without actually being in power. So they said they would make special exemptions for senior NHS staff, which the pensions industry pointed out would be grossly unfair and lead to numerous court cases. So now they are apparently taking it all under advisement. i.e They haven't got the faintest idea what to do.
PM3 said:
I wonder how much there is tied up in un-realised 25% portions of pensions in the current over 55 cohort in UK today ? Can you imagine the run on that if there was a serious intention ( not immediate legislation ) to scrap that .
Also, if such run on pension funds ( and lets face it most is in some form of equities ) happened , surely this massive sell off would make a market shudder.
I for one would start taking my DB and the 25% and my 3 DC/SIPP pensions that I had no intention of touching for foreseeable future. Early retiree living off savings that are not in any tax shelter ( interest is effectively non taxed due to zero relevant earnings )
So for me personally : even mention the term "25%" has my instant attention
I’m not sure about that.Also, if such run on pension funds ( and lets face it most is in some form of equities ) happened , surely this massive sell off would make a market shudder.
I for one would start taking my DB and the 25% and my 3 DC/SIPP pensions that I had no intention of touching for foreseeable future. Early retiree living off savings that are not in any tax shelter ( interest is effectively non taxed due to zero relevant earnings )
So for me personally : even mention the term "25%" has my instant attention
What would you do with the “25%” if you took it? Chances are that you would invest it, just in a different wrapper (a GIA, say, rather than a pension). The remaining 75% would still be within the pensions tax wrapper.
So there might be a bit of extra tax revenue from less tax efficient investments, but it would still be invested broadly the same way.
Tax free 25% was capped with the removal of LTA (for most people) - it's £268,275.
Easiest thing to do is reduce the cap, over a suitable time period, or reduce the % at some point, or both.
Hard to imagine that they will remove it from anyone who could have already taken it - or has partially taken it.\
With most things pension related, there's either decent warning given, or protection for those already over it. Pensions are a long term plan for people, so major negative changes can cause real issues for people. Positive changes always welcome though
LTA was always kind of unfair, as it penalised fund performance - but I guess that just makes it like any other 'windfall' tax.
Who knows what they'll do there - maybe just make it for DC pensions. It's a great one for Labour as it only affects those millionaires.....
Easiest thing to do is reduce the cap, over a suitable time period, or reduce the % at some point, or both.
Hard to imagine that they will remove it from anyone who could have already taken it - or has partially taken it.\
With most things pension related, there's either decent warning given, or protection for those already over it. Pensions are a long term plan for people, so major negative changes can cause real issues for people. Positive changes always welcome though
LTA was always kind of unfair, as it penalised fund performance - but I guess that just makes it like any other 'windfall' tax.
Who knows what they'll do there - maybe just make it for DC pensions. It's a great one for Labour as it only affects those millionaires.....
Interesting topic-useful paper on the subject on link below. Labour will have to be really clear as to what there proposals are on this subject during the election campaign...
https://www.lcp.com/media/ikspwg0g/lcp_could-the-l...
https://www.lcp.com/media/ikspwg0g/lcp_could-the-l...
BobToc said:
They’ve stated that they’ll find some sort of solution for highly paid civil servants but I struggle to see how they’ll implement that. My guess is that they row back on the LTA and target annual contributions instead.
I don't see why highly paid civil servants should get a bigger allowance. They are well paid and get a decent pension, that's how they end up at the LTA.98elise said:
BobToc said:
They’ve stated that they’ll find some sort of solution for highly paid civil servants but I struggle to see how they’ll implement that. My guess is that they row back on the LTA and target annual contributions instead.
I don't see why highly paid civil servants should get a bigger allowance. They are well paid and get a decent pension, that's how they end up at the LTA.R
The Leaper said:
98elise said:
BobToc said:
They’ve stated that they’ll find some sort of solution for highly paid civil servants but I struggle to see how they’ll implement that. My guess is that they row back on the LTA and target annual contributions instead.
I don't see why highly paid civil servants should get a bigger allowance. They are well paid and get a decent pension, that's how they end up at the LTA.R
It means I've gone from being productive and paying high rate taxes, to being a drain on society.
LTA and IR35 simply made it not worth working.
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