Increased lifetime allowance - would you work longer?
Poll: Increased lifetime allowance - would you work longer?
Total Members Polled: 179
Discussion
I've just been reading about Jeremy Hunt proposing to increase the pensions lifetime allowance to encourage people to work longer.
Would this make you work longer???
My personal view is that I'm working until I can comfortably afford not to work. Between plans to move away from the South East and take cash out of our house and various other bits and pieces, I doubt I'll actually need to get up to the current lifetime allowance before retiring early anyway, but if I did expect to exceed it, then increasing the allowance would surely mean I could retire earlier not later?
The key points as I understand it are the following:
1. The first £1.07m in my pot is my lifetime allowance, and going over that doesn't mean I pay anything on it, I'll only pay on the amount I exceed it by.
2. Let's say I currently exceed the LTA by £300k. If I wanted to take that as a lump sum, I'd be taxed at 55%, so would only keep £135k. If I took it as drawdown, on the other hand, I'd only lose 24%, but hey, that's still £75k less to play with.
So, assuming I'm working towards being able to draw a certain amount of income from my pension and other investments in retirement, if the chancellor increases the LTA, meaning I would, in my above scenario, be able to keep hold of an additional £75k to £165k of my own money, and I'd decided for sake of argument that I wanted £40k net annual income to live on, why on earth wouldn't I just retire 2 to 4 years earlier than currently planned?
I know that quite a lot of doctors have been stopping work when they hit the LTA because they're not going to be increasing the value of their pension as quickly, but I don't understand how anyone can actually end up worse off as a result of exceeding the LTA as it stands, nor how increasing it would actually make anyone work for longer?
Would this make you work longer???
My personal view is that I'm working until I can comfortably afford not to work. Between plans to move away from the South East and take cash out of our house and various other bits and pieces, I doubt I'll actually need to get up to the current lifetime allowance before retiring early anyway, but if I did expect to exceed it, then increasing the allowance would surely mean I could retire earlier not later?
The key points as I understand it are the following:
1. The first £1.07m in my pot is my lifetime allowance, and going over that doesn't mean I pay anything on it, I'll only pay on the amount I exceed it by.
2. Let's say I currently exceed the LTA by £300k. If I wanted to take that as a lump sum, I'd be taxed at 55%, so would only keep £135k. If I took it as drawdown, on the other hand, I'd only lose 24%, but hey, that's still £75k less to play with.
So, assuming I'm working towards being able to draw a certain amount of income from my pension and other investments in retirement, if the chancellor increases the LTA, meaning I would, in my above scenario, be able to keep hold of an additional £75k to £165k of my own money, and I'd decided for sake of argument that I wanted £40k net annual income to live on, why on earth wouldn't I just retire 2 to 4 years earlier than currently planned?
I know that quite a lot of doctors have been stopping work when they hit the LTA because they're not going to be increasing the value of their pension as quickly, but I don't understand how anyone can actually end up worse off as a result of exceeding the LTA as it stands, nor how increasing it would actually make anyone work for longer?
means when I take the tax free bit of my pension at 55 I can still contribute 10k instead of 4k, so that is 30k extra. Not a massive difference and wont stop/start me continuing to work.
The money could be better spent training more doctors I suppose instead of trying to hang on to the old ones and kicking the can down the road.
The money could be better spent training more doctors I suppose instead of trying to hang on to the old ones and kicking the can down the road.
Super Sonic said:
This is the govt 'solving the health crisis'.
If it also benefits their rich chums, well that's all good.
It’s also taking us back in time to the heady days of the last Labour government, though the annual allowance won’t be anywhere near the £255k mark it was in 2010. If it also benefits their rich chums, well that's all good.
Successive Tory governments have actually reduced these allowances over the last 12 years.
sugerbear said:
means when I take the tax free bit of my pension at 55 I can still contribute 10k instead of 4k, so that is 30k extra. Not a massive difference and wont stop/start me continuing to work.
The money could be better spent training more doctors I suppose instead of trying to hang on to the old ones and kicking the can down the road.
Nope. You can take the tax free bit without affecting your annual allowance of £40k or £60k. The money could be better spent training more doctors I suppose instead of trying to hang on to the old ones and kicking the can down the road.
Just don’t do anything else like drawdown !!
JagLover said:
I think it is mainly aimed at persuading Doctors to retire later.
For all those who are not highly paid employees on DB schemes the existence of the cap mainly affects tax planning opportunities rather than retirement plans.
Drs left in part because now IR35. The head of IPSE (body that represented contractors) is a Dr and reported to the house of commons people would sooner stop working than pay 60% or more away in tax and have to cover all of thier expenses. The government said nah tough where else can you work....the answer they retired For all those who are not highly paid employees on DB schemes the existence of the cap mainly affects tax planning opportunities rather than retirement plans.
I'm not sure the binary question is quite right is it?
In that it's not just about persuading those that have completely given up work to come back and work until their are older, but also about those that have reduced / are considering reducing their hours isn't it?
i.e. If I'm a doctor on 150K, should I would 5 days a week, or drop to 3 for not much differece in my pay.....
In this case, I can well imagine that the proposed change may make some people change their decision and continue to work more than they might otherwise do?
In that it's not just about persuading those that have completely given up work to come back and work until their are older, but also about those that have reduced / are considering reducing their hours isn't it?
i.e. If I'm a doctor on 150K, should I would 5 days a week, or drop to 3 for not much differece in my pay.....
In this case, I can well imagine that the proposed change may make some people change their decision and continue to work more than they might otherwise do?
Well I'm not sure I'm going to get to the old cap tbh but my retirement plan is to aim for a number that allows me to draw down at 4% p.a. and provide what I think is enough money. I don't want to work longer than I have to, and I don't particularly want or need more than the number I have planned in my head.
The old cap was more than sufficient to provide this number so increasing it massively doesn't really incentivize me to want to work longer as I'd rather have the time than the money.
The old cap was more than sufficient to provide this number so increasing it massively doesn't really incentivize me to want to work longer as I'd rather have the time than the money.
fat80b said:
I'm not sure the binary question is quite right is it?
In that it's not just about persuading those that have completely given up work to come back and work until their are older, but also about those that have reduced / are considering reducing their hours isn't it?
i.e. If I'm a doctor on 150K, should I would 5 days a week, or drop to 3 for not much differece in my pay.....
In this case, I can well imagine that the proposed change may make some people change their decision and continue to work more than they might otherwise do?
I think when you look at take home pay etc 100k to 120k per month take home is not significantly different an again at 125k with new tax band you will loose more. 500 more a month is a lot when your on 30k (take home about 2k a month) when your on 6k a month an extra 500 for all the extra stress is likely not worth it. That's the point the goverment are doing the usual thing like they do for "hard working families" better off by 500 a year etc we'll at the other end of the scale highly paid individuals later in life probably can't be arsed for what amounts to a whole load of effort to be £20 a day better off when they might incure travel costs an other expenses.In that it's not just about persuading those that have completely given up work to come back and work until their are older, but also about those that have reduced / are considering reducing their hours isn't it?
i.e. If I'm a doctor on 150K, should I would 5 days a week, or drop to 3 for not much differece in my pay.....
In this case, I can well imagine that the proposed change may make some people change their decision and continue to work more than they might otherwise do?
The government just don't get it people need to keep more of their money than the state take an not just a little more
To get some proper perspective on this I would love to know the % of people that this is really a problem for.
It must be extremely low and certainly not something that will make a blind bit of difference in the real world. If you've managed to save £1m in a pension your either extremely wealthy and pensions wont be your only investment, or you've lived like a hermit and get all hot and bothered downstairs when your statement comes in.
It must be extremely low and certainly not something that will make a blind bit of difference in the real world. If you've managed to save £1m in a pension your either extremely wealthy and pensions wont be your only investment, or you've lived like a hermit and get all hot and bothered downstairs when your statement comes in.
Gecko1978 said:
The government just don't get it people need to keep more of their money than the state take an not just a little more
Completely agree. I think what is interesting to me on this one is that this shift in Hunt's budget (to offer incentives to those on £150K) has similarities to that of Kwasi's top rate of tax change not too long ago - I'm interested to see how the media sell this to the general public.
i.e. is it again pitched as a millionaires tax break and therefore crashing the economy, or because it is Hunt and Rishi, is it now suddenly a good idea?
Four Litre said:
To get some proper perspective on this I would love to know the % of people that this is really a problem for.
It must be extremely low and certainly not something that will make a blind bit of difference in the real world. If you've managed to save £1m in a pension your either extremely wealthy and pensions wont be your only investment, or you've lived like a hermit and get all hot and bothered downstairs when your statement comes in.
Not wanting to be a cock about it but you work hard (one assumes) to make a Good chunk then retire because paying 60% tax does not appeal, your kids have moved out, you have no mortgage, you want to enjoy life.It must be extremely low and certainly not something that will make a blind bit of difference in the real world. If you've managed to save £1m in a pension your either extremely wealthy and pensions wont be your only investment, or you've lived like a hermit and get all hot and bothered downstairs when your statement comes in.
The government saying why nit save more....f that why give them 60% of your take home when your comfortable already. A poster on here has laid it out 4% of their pot per year an that's it they are done. They don't want to work anymore they have done enough
Four Litre said:
To get some proper perspective on this I would love to know the % of people that this is really a problem for.
It must be extremely low and certainly not something that will make a blind bit of difference in the real world. If you've managed to save £1m in a pension your either extremely wealthy and pensions wont be your only investment, or you've lived like a hermit and get all hot and bothered downstairs when your statement comes in.
Not necessarily. It must be extremely low and certainly not something that will make a blind bit of difference in the real world. If you've managed to save £1m in a pension your either extremely wealthy and pensions wont be your only investment, or you've lived like a hermit and get all hot and bothered downstairs when your statement comes in.
I'm not up to a million yet, but apart from capital appreciation in my family home, basically all my savings are in pensions.
Given that my employer puts in £2.5 for every £1 I do, and HMRC puts in 40p for every 60p I do, why would I put my savings anywhere else?
Four Litre said:
To get some proper perspective on this I would love to know the % of people that this is really a problem for.
It must be extremely low and certainly not something that will make a blind bit of difference in the real world. If you've managed to save £1m in a pension your either extremely wealthy and pensions wont be your only investment, or you've lived like a hermit and get all hot and bothered downstairs when your statement comes in.
It will make a difference to the people the government thinks need to be incentivised to continue working otherwise they wouldn’t be bothering with it. It’s not about the % it affects it’s about the importance of that tiny % to the running of the country, primarily the NHS.It must be extremely low and certainly not something that will make a blind bit of difference in the real world. If you've managed to save £1m in a pension your either extremely wealthy and pensions wont be your only investment, or you've lived like a hermit and get all hot and bothered downstairs when your statement comes in.
I’m neither extremely wealthy nor a hermit and the LTA at £1.07m is an issue for me.
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