Increased lifetime allowance - would you work longer?
Poll: Increased lifetime allowance - would you work longer?
Total Members Polled: 179
Discussion
SmoothCriminal said:
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.
On a bbc article it said 1.3 million people or <4% of the current workforce have breached or are likely to.I can't say I can feel a huge amount of "oh no, poor them" for people looking at six-figure retirement incomes. Sorry wormus.
Zed Ed said:
wormus said:
If it goes ahead I welcome it. I’m in a defined benefit pension and I’m already exceeding the 40k limit and well on track to exceed the LTA. This means I get an annual self assessment tax bill for income I’ve yet to receive which is unfair. Only thing I could do is opt out of the pension scheme (stupid) or retire early, instead I can carry on working until 62 as planned (another 10 years) and retire on a 85-90k pension. 5 years after that I’d get the 9k state pension so 6 figs in retirement including the wife’s pension. It also means I can offset the recent 125k 45p income tax change by maxing out to the 60k annual allowance, if that’s what’s proposed.
Unfair? I imagine you might be in the Chancellor’s sights.Any money purchase scheme member would need a very serious pot to deliver your level of stated income.
Flooble said:
I suspect that's largely those left in DB schemes and is as much about accounting as it is about actual money. As per wormus above.
I can't say I can feel a huge amount of "oh no, poor them" for people looking at six-figure retirement incomes. Sorry wormus.
I am not paid super duper wages like many here, don't get huge employer top ups, have never come close to annual allowances, never made any contributions outside of employers scheme yet still through the current limit with a fair few years left yet to retirement age. I can't say I can feel a huge amount of "oh no, poor them" for people looking at six-figure retirement incomes. Sorry wormus.
I can also only dream about a pension the size of wormus
Whilst it undoubtedly only affects a small group of the population, for those it does affect it affects them profoundly - with crazy high marginal tax rates; it’s a massive tax on work for those people so it’s very understandable why they might elect to leave the labour force.
It is a lesson for the government in basic economics though…if you tax something then don’t be surprised when people do less of that thing.
It is a lesson for the government in basic economics though…if you tax something then don’t be surprised when people do less of that thing.
Edited by brickwall on Wednesday 15th March 10:38
I tried to do some maths on this for my BiL recently, who after a 10k pay rise (netting to 5k post tax, NI and, err, contributions to a pension) as a civil servant is looking at a £30k tax bill because of the way the maths works for the annual allowance (and the oddity of high inflation increasing apparent value of Alpha this year).
I reckon anyone in the main Alpha scheme earning 107k plus is risking an AA breach every year.
At that rate you’re paying in 7.35% gross, £7865 pa. The claimed employer contribution rates when there is no real pot are just accounting fluff designed to let HMT pull cash back they’ve given to departments, and let the hard of thinking consider it part of their remuneration. The % is irrelevant when you can’t use it to pay your new, 4.99% higher council tax bill.
The accrual rate is 2.32%, so your Alpha pot grows by £2482 p/a, from your state retirement age, which is about 68 now.
The claimed value is 16* that, which is your pension input amount, £39,718 pa. The AA is 40k.
The maths to confirm that involve using a previous year’s inflation amount to your old closing balance, which does create some headroom, it being compared to the new. But as the new pot also goes up by inflation, which this year should be 10.1%, there may well be a lot of mid ranking people hoping their previous years have unused contributions, or there will be tax bills that folks simply cannot do anything about. Yes smallest violin/ politics of envy/ they made their choices. Personally I’m happy with doctors being paid however much if they can treat me or my kids, you may prefer unquantifiable risk or to use your own funds to pay privately come what may.
Got to wonder how MPs handle it, and it they just get their scheme to pay, reducing benefits of course, perhaps they’re such big benefits they don’t care.
I reckon anyone in the main Alpha scheme earning 107k plus is risking an AA breach every year.
At that rate you’re paying in 7.35% gross, £7865 pa. The claimed employer contribution rates when there is no real pot are just accounting fluff designed to let HMT pull cash back they’ve given to departments, and let the hard of thinking consider it part of their remuneration. The % is irrelevant when you can’t use it to pay your new, 4.99% higher council tax bill.
The accrual rate is 2.32%, so your Alpha pot grows by £2482 p/a, from your state retirement age, which is about 68 now.
The claimed value is 16* that, which is your pension input amount, £39,718 pa. The AA is 40k.
The maths to confirm that involve using a previous year’s inflation amount to your old closing balance, which does create some headroom, it being compared to the new. But as the new pot also goes up by inflation, which this year should be 10.1%, there may well be a lot of mid ranking people hoping their previous years have unused contributions, or there will be tax bills that folks simply cannot do anything about. Yes smallest violin/ politics of envy/ they made their choices. Personally I’m happy with doctors being paid however much if they can treat me or my kids, you may prefer unquantifiable risk or to use your own funds to pay privately come what may.
Got to wonder how MPs handle it, and it they just get their scheme to pay, reducing benefits of course, perhaps they’re such big benefits they don’t care.
Sheepshanks said:
The x20 multiple used for DB pensions is an absolute gift. x40 would be more realistic.
Should it not be the expected period of retirement? Not many of us are going to be able to retire for 40 years. I would have thought life expectancy minus pension age would be fair, so 85 ish - 60 ish =25Kermit power said:
Would you actively choose to work longer though? And if so, how much longer?
Slow response - apologies.Almost certainly as I enjoy what I do & having started a pension in earnest at 20, I risk breaching the current LTA in my 40s.
Likely I'd drop to working part time first mind.
Whilst I understand the sentiment among most people of "woah, (just over) a million pounds in a pension = rich b
d", and accepting that a lot of people will not get anywhere near that, it is not as much as the headline number makes you think.
Assuming that someone with a maxed-out pension pot buys an annuity with all of it, depending on the terms of the annuity (spouse/dependents pensions etc), then that would be between £30K and £40K a year of income, which of course would be taxed.
A comfortable amount to live on in retirement, absolutely - but hardly luxurious and lavish (I appreciate people's view on what is lavish is subjective).
I am probably going to hit the current threshold by the time I hit retirement age. From my perspective, it is about time high earners were not hammered at every opportunity, and this is a small step to giving something back to those that contribute the most.
Changing the topic slightly - there is clearly a lack of understanding amongst the general population as to how pensions work (including the state pension) - I really think that this is something that should be taught properly in schools, along with mortgages and taxation in general (far more useful that learning trigonometry). I have taken on younger staff in their 20's (educated, professional roles) who knew very little about, and had little interest in pensions, didn't understand mortgages etc (and were horrified by the concept of stamp duty).
d", and accepting that a lot of people will not get anywhere near that, it is not as much as the headline number makes you think. Assuming that someone with a maxed-out pension pot buys an annuity with all of it, depending on the terms of the annuity (spouse/dependents pensions etc), then that would be between £30K and £40K a year of income, which of course would be taxed.
A comfortable amount to live on in retirement, absolutely - but hardly luxurious and lavish (I appreciate people's view on what is lavish is subjective).
I am probably going to hit the current threshold by the time I hit retirement age. From my perspective, it is about time high earners were not hammered at every opportunity, and this is a small step to giving something back to those that contribute the most.
Changing the topic slightly - there is clearly a lack of understanding amongst the general population as to how pensions work (including the state pension) - I really think that this is something that should be taught properly in schools, along with mortgages and taxation in general (far more useful that learning trigonometry). I have taken on younger staff in their 20's (educated, professional roles) who knew very little about, and had little interest in pensions, didn't understand mortgages etc (and were horrified by the concept of stamp duty).
TriumphStag3.0V8 said:
Whilst I understand the sentiment among most people of "woah, (just over) a million pounds in a pension = rich bd", and accepting that a lot of people will not get anywhere near that, it is not as much as the headline number makes you think.
Assuming that someone with a maxed-out pension pot buys an annuity with all of it, depending on the terms of the annuity (spouse/dependents pensions etc), then that would be between £30K and £40K a year of income, which of course would be taxed.
A comfortable amount to live on in retirement, absolutely - but hardly luxurious and lavish (I appreciate people's view on what is lavish is subjective).
I think that probably is luxurious and lavish to most people though. It's about or above the median income for a section of the population who likely don't have a mortgage, don't have kids to feed at home, a need to travel for work, but do get concessions, winter fuel payments, etc.d", and accepting that a lot of people will not get anywhere near that, it is not as much as the headline number makes you think. Assuming that someone with a maxed-out pension pot buys an annuity with all of it, depending on the terms of the annuity (spouse/dependents pensions etc), then that would be between £30K and £40K a year of income, which of course would be taxed.
A comfortable amount to live on in retirement, absolutely - but hardly luxurious and lavish (I appreciate people's view on what is lavish is subjective).
But that might be fine, at least by me, if it persuades people to work who otherwise wouldn't. I can't see that happening though, instead some people will just squirrel more money away.
TriumphStag3.0V8 said:
Whilst I understand the sentiment among most people of "woah, (just over) a million pounds in a pension = rich bd", and accepting that a lot of people will not get anywhere near that, it is not as much as the headline number makes you think.
Assuming that someone with a maxed-out pension pot buys an annuity with all of it, depending on the terms of the annuity (spouse/dependents pensions etc), then that would be between £30K and £40K a year of income, which of course would be taxed.
A comfortable amount to live on in retirement, absolutely - but hardly luxurious and lavish (I appreciate people's view on what is lavish is subjective).
I am probably going to hit the current threshold by the time I hit retirement age. From my perspective, it is about time high earners were not hammered at every opportunity, and this is a small step to giving something back to those that contribute the most.
Changing the topic slightly - there is clearly a lack of understanding amongst the general population as to how pensions work (including the state pension) - I really think that this is something that should be taught properly in schools, along with mortgages and taxation in general (far more useful that learning trigonometry). I have taken on younger staff in their 20's (educated, professional roles) who knew very little about, and had little interest in pensions, didn't understand mortgages etc (and were horrified by the concept of stamp duty).
Pensions are one of the best perks for high earners. We get to avoid tax and NI on a huge chunk of our earnings when we pay it into a pension, avoid tax on any investment gains whilst it's in the Pension, withdraw 25% of it completely tax free and then pay tax on the remainder at our marginal rate (which is likely to be lower when we're retired than it is now). Any money in the pension also sits outside our IHT band.d", and accepting that a lot of people will not get anywhere near that, it is not as much as the headline number makes you think. Assuming that someone with a maxed-out pension pot buys an annuity with all of it, depending on the terms of the annuity (spouse/dependents pensions etc), then that would be between £30K and £40K a year of income, which of course would be taxed.
A comfortable amount to live on in retirement, absolutely - but hardly luxurious and lavish (I appreciate people's view on what is lavish is subjective).
I am probably going to hit the current threshold by the time I hit retirement age. From my perspective, it is about time high earners were not hammered at every opportunity, and this is a small step to giving something back to those that contribute the most.
Changing the topic slightly - there is clearly a lack of understanding amongst the general population as to how pensions work (including the state pension) - I really think that this is something that should be taught properly in schools, along with mortgages and taxation in general (far more useful that learning trigonometry). I have taken on younger staff in their 20's (educated, professional roles) who knew very little about, and had little interest in pensions, didn't understand mortgages etc (and were horrified by the concept of stamp duty).
Countdown said:
Pensions are one of the best perks for high earners. We get to avoid tax and NI on a huge chunk of our earnings when we pay it into a pension, avoid tax on any investment gains whilst it's in the Pension, withdraw 25% of it completely tax free and then pay tax on the remainder at our marginal rate (which is likely to be lower when we're retired than it is now). Any money in the pension also sits outside our IHT band.
The question is can that change? I don't really trust the government to not find creative ways to open the wallets of people with some cash. Who else is going to fund their disasters?djc206 said:
Sheepshanks said:
The x20 multiple used for DB pensions is an absolute gift. x40 would be more realistic.
Should it not be the expected period of retirement? Not many of us are going to be able to retire for 40 years. I would have thought life expectancy minus pension age would be fair, so 85 ish - 60 ish =25768 said:
TriumphStag3.0V8 said:
Whilst I understand the sentiment among most people of "woah, (just over) a million pounds in a pension = rich bd", and accepting that a lot of people will not get anywhere near that, it is not as much as the headline number makes you think.
Assuming that someone with a maxed-out pension pot buys an annuity with all of it, depending on the terms of the annuity (spouse/dependents pensions etc), then that would be between £30K and £40K a year of income, which of course would be taxed.
A comfortable amount to live on in retirement, absolutely - but hardly luxurious and lavish (I appreciate people's view on what is lavish is subjective).
I think that probably is luxurious and lavish to most people though. It's about or above the median income for a section of the population who likely don't have a mortgage, don't have kids to feed at home, a need to travel for work, but do get concessions, winter fuel payments, etc.d", and accepting that a lot of people will not get anywhere near that, it is not as much as the headline number makes you think. Assuming that someone with a maxed-out pension pot buys an annuity with all of it, depending on the terms of the annuity (spouse/dependents pensions etc), then that would be between £30K and £40K a year of income, which of course would be taxed.
A comfortable amount to live on in retirement, absolutely - but hardly luxurious and lavish (I appreciate people's view on what is lavish is subjective).
But that might be fine, at least by me, if it persuades people to work who otherwise wouldn't. I can't see that happening though, instead some people will just squirrel more money away.
It also depends on location. I have a DB scheme from my first job which accounts for 10% of my lifetime allowance. The actual amount I will receive will just about cover my council tax (and no, we have worked hard for the forever home we are in, so don't want to downsize - it is a decent 4 bed detached but not a mansion by any stretch of the imagination).
What concessions do these pensioners get then? free bus pass? TV licence? a few hundred quid for winter fuel payments? How do these compare in amount to things like child benefit/childcare allowances etc that these people who do have kids to feed on a median income receive? Should people who have WFH jobs be paid less? etc.
Jockman said:
djc206 said:
Sheepshanks said:
The x20 multiple used for DB pensions is an absolute gift. x40 would be more realistic.
Should it not be the expected period of retirement? Not many of us are going to be able to retire for 40 years. I would have thought life expectancy minus pension age would be fair, so 85 ish - 60 ish =25Killboy said:
Countdown said:
Pensions are one of the best perks for high earners. We get to avoid tax and NI on a huge chunk of our earnings when we pay it into a pension, avoid tax on any investment gains whilst it's in the Pension, withdraw 25% of it completely tax free and then pay tax on the remainder at our marginal rate (which is likely to be lower when we're retired than it is now). Any money in the pension also sits outside our IHT band.
The question is can that change? I don't really trust the government to not find creative ways to open the wallets of people with some cash. Who else is going to fund their disasters?Countdown said:
Jockman said:
djc206 said:
Sheepshanks said:
The x20 multiple used for DB pensions is an absolute gift. x40 would be more realistic.
Should it not be the expected period of retirement? Not many of us are going to be able to retire for 40 years. I would have thought life expectancy minus pension age would be fair, so 85 ish - 60 ish =25Countdown said:
TriumphStag3.0V8 said:
Whilst I understand the sentiment among most people of "woah, (just over) a million pounds in a pension = rich bd", and accepting that a lot of people will not get anywhere near that, it is not as much as the headline number makes you think.
Assuming that someone with a maxed-out pension pot buys an annuity with all of it, depending on the terms of the annuity (spouse/dependents pensions etc), then that would be between £30K and £40K a year of income, which of course would be taxed.
A comfortable amount to live on in retirement, absolutely - but hardly luxurious and lavish (I appreciate people's view on what is lavish is subjective).
I am probably going to hit the current threshold by the time I hit retirement age. From my perspective, it is about time high earners were not hammered at every opportunity, and this is a small step to giving something back to those that contribute the most.
Changing the topic slightly - there is clearly a lack of understanding amongst the general population as to how pensions work (including the state pension) - I really think that this is something that should be taught properly in schools, along with mortgages and taxation in general (far more useful that learning trigonometry). I have taken on younger staff in their 20's (educated, professional roles) who knew very little about, and had little interest in pensions, didn't understand mortgages etc (and were horrified by the concept of stamp duty).
Pensions are one of the best perks for high earners. We get to avoid tax and NI on a huge chunk of our earnings when we pay it into a pension, avoid tax on any investment gains whilst it's in the Pension, withdraw 25% of it completely tax free and then pay tax on the remainder at our marginal rate (which is likely to be lower when we're retired than it is now). Any money in the pension also sits outside our IHT band.d", and accepting that a lot of people will not get anywhere near that, it is not as much as the headline number makes you think. Assuming that someone with a maxed-out pension pot buys an annuity with all of it, depending on the terms of the annuity (spouse/dependents pensions etc), then that would be between £30K and £40K a year of income, which of course would be taxed.
A comfortable amount to live on in retirement, absolutely - but hardly luxurious and lavish (I appreciate people's view on what is lavish is subjective).
I am probably going to hit the current threshold by the time I hit retirement age. From my perspective, it is about time high earners were not hammered at every opportunity, and this is a small step to giving something back to those that contribute the most.
Changing the topic slightly - there is clearly a lack of understanding amongst the general population as to how pensions work (including the state pension) - I really think that this is something that should be taught properly in schools, along with mortgages and taxation in general (far more useful that learning trigonometry). I have taken on younger staff in their 20's (educated, professional roles) who knew very little about, and had little interest in pensions, didn't understand mortgages etc (and were horrified by the concept of stamp duty).
Anyway - It's nice to have that "perk" 20-40 years into the future when your income is being pillaged at 63% and 45% in the here and now.
Countdown said:
Killboy said:
Countdown said:
Pensions are one of the best perks for high earners. We get to avoid tax and NI on a huge chunk of our earnings when we pay it into a pension, avoid tax on any investment gains whilst it's in the Pension, withdraw 25% of it completely tax free and then pay tax on the remainder at our marginal rate (which is likely to be lower when we're retired than it is now). Any money in the pension also sits outside our IHT band.
The question is can that change? I don't really trust the government to not find creative ways to open the wallets of people with some cash. Who else is going to fund their disasters?I’ve almost hit the lifetime allowance at 49 y/o and have approx 30k per annum going in.
My plan was to take it a bit easier and then retire fully at 55, as pd off with 45% tax and pressures / long hours.
Assuming there’s no change to 55 year eligibility to withdraw then I’ll just stuff as much as possible in my pension for the next few years before taking it easy.
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