Increased lifetime allowance - would you work longer?

[Jockman]

Ok thanks. Gets a bit confusing as many pension providers have already changed their literature to say 2028.

[gotoPzero]

My wifes did the same but when she questioned them about it they sent her a letter saying "proposed" etc.
Its going to happen, I am pretty sure of it. But I do think they have been delaying and delaying.

I suspect it wont happen till after the next election now, but who knows!

IANAFA!

[bennno]

bennno said:

So let’s say I’ve theoretically got circa 30k going in at source.

If I want to increase to 60k, do I need to pay an extra 30k after tax and reclaim tax at end of tax year - or can I pay net and it gets topped up - how does this work……?

Can anybody guide on this?

[wormus]

bennno said:

bennno said:

So let’s say I’ve theoretically got circa 30k going in at source.

If I want to increase to 60k, do I need to pay an extra 30k after tax and reclaim tax at end of tax year - or can I pay net and it gets topped up - how does this work……?

Can anybody guide on this?

Just ask your employer to increase your voluntary contribution and they will deduct it from your pre tax salary.

[TriumphStag3.0V8]

wormus said:

bennno said:

bennno said:

So let’s say I’ve theoretically got circa 30k going in at source.

If I want to increase to 60k, do I need to pay an extra 30k after tax and reclaim tax at end of tax year - or can I pay net and it gets topped up - how does this work……?

Can anybody guide on this?

Just ask your employer to increase your voluntary contribution and they will deduct it from your pre tax salary.

isn't that only the case for salary sacrifice schemes? If not, surely the tax relief is only at 20% and benno would need to claim the additional tax back?

[Cupid-stunt]

gotoPzero said:

Jockman said:

You sure?

https://www.gov.uk/government/publications/increas...

Seems pretty solid on the Govt website. Apologies if I’m misreading.

Yes I am sure Everything I said is still correct. The article you linked is from 2021. Is now 2023 and its still not been passed into law.

The article also mentions the date (its Nov 21) that I was talking about.

So in theory, if and when this is passed ( I am not saying it wont be but its not yet) then this may be something that does not effect a lot of people.

Also, as time goes on, they are getting too close to the 2028 date. Personally I think we might see this pushed to early 2030s.

I too was of the impression it was 57 (increase from 55) ...

The LTA is the maximum amount of tax relievable pension savings an individual can benefit from over the course of their lifetime. Individuals may contribute to their pension over these limits,but they will be subject to a tax charge on the amount above the allowance. The excess is taxed either at 55% where taken as a lump sum, or at 25% where taken as pension. Most individuals are subject to the standard LTA. However, when the LTA was introduced, and each time it has been reduced, protections have been offered to safeguard individuals who had already built-up significant pension savings on the expectation of a certain level of LTA. This measure ensures that nobody will face an LTA charge from April 2023. At a future fiscal event, the government will make the necessary changes to entirely remove the LTA from pensions tax legislation. Consequently, this measure also removes the need for individuals to rely on protections from previous decreases to the LTA.

Individuals may be able to receive to a tax-free lump sum when they become entitled to their pension benefits: a pension commencement lump sum (PCLS). The maximum amount that most individuals can claim as a PCLS is currently 25 per cent of their available LTA at the time this sum is taken. This measure sets a PCLS upper monetary cap of £268,275 (25 per cent of the current LTA). However, those individuals who already have a protected right to take a higher PCLS will continue be able to do so.

For some individuals, lump sums which are tax-free up to the LTA are taxed at 55% on any amount taken above the LTA. This measure ensures that, in such cases, these lump sums are instead taxed at an individual’s marginal rate of income tax.

So is £268k the max you can take out as a lump sum? Or will this be increased?

[TriumphStag3.0V8]

Cupid-stunt said:

gotoPzero said:

Jockman said:

You sure?

https://www.gov.uk/government/publications/increas...

Seems pretty solid on the Govt website. Apologies if I’m misreading.

Yes I am sure Everything I said is still correct. The article you linked is from 2021. Is now 2023 and its still not been passed into law.

The article also mentions the date (its Nov 21) that I was talking about.

So in theory, if and when this is passed ( I am not saying it wont be but its not yet) then this may be something that does not effect a lot of people.

Also, as time goes on, they are getting too close to the 2028 date. Personally I think we might see this pushed to early 2030s.

I too was of the impression it was 57 (increase from 55) ...

The LTA is the maximum amount of tax relievable pension savings an individual can benefit from over the course of their lifetime. Individuals may contribute to their pension over these limits,but they will be subject to a tax charge on the amount above the allowance. The excess is taxed either at 55% where taken as a lump sum, or at 25% where taken as pension. Most individuals are subject to the standard LTA. However, when the LTA was introduced, and each time it has been reduced, protections have been offered to safeguard individuals who had already built-up significant pension savings on the expectation of a certain level of LTA. This measure ensures that nobody will face an LTA charge from April 2023. At a future fiscal event, the government will make the necessary changes to entirely remove the LTA from pensions tax legislation. Consequently, this measure also removes the need for individuals to rely on protections from previous decreases to the LTA.

Individuals may be able to receive to a tax-free lump sum when they become entitled to their pension benefits: a pension commencement lump sum (PCLS). The maximum amount that most individuals can claim as a PCLS is currently 25 per cent of their available LTA at the time this sum is taken. This measure sets a PCLS upper monetary cap of £268,275 (25 per cent of the current LTA). However, those individuals who already have a protected right to take a higher PCLS will continue be able to do so.

For some individuals, lump sums which are tax-free up to the LTA are taxed at 55% on any amount taken above the LTA. This measure ensures that, in such cases, these lump sums are instead taxed at an individual’s marginal rate of income tax.

So is £268k the max you can take out as a lump sum? Or will this be increased?

It's a good question, it does read that way. Unlimited pot, but limited tax free sum. Need to see more detail as it comes out.

[leef44]

Cupid-stunt said:

I too was of the impression it was 57 (increase from 55) ...

The LTA is the maximum amount of tax relievable pension savings an individual can benefit from over the course of their lifetime. Individuals may contribute to their pension over these limits,but they will be subject to a tax charge on the amount above the allowance. The excess is taxed either at 55% where taken as a lump sum, or at 25% where taken as pension. Most individuals are subject to the standard LTA. However, when the LTA was introduced, and each time it has been reduced, protections have been offered to safeguard individuals who had already built-up significant pension savings on the expectation of a certain level of LTA. This measure ensures that nobody will face an LTA charge from April 2023. At a future fiscal event, the government will make the necessary changes to entirely remove the LTA from pensions tax legislation. Consequently, this measure also removes the need for individuals to rely on protections from previous decreases to the LTA.

Individuals may be able to receive to a tax-free lump sum when they become entitled to their pension benefits: a pension commencement lump sum (PCLS). The maximum amount that most individuals can claim as a PCLS is currently 25 per cent of their available LTA at the time this sum is taken. This measure sets a PCLS upper monetary cap of £268,275 (25 per cent of the current LTA). However, those individuals who already have a protected right to take a higher PCLS will continue be able to do so.

For some individuals, lump sums which are tax-free up to the LTA are taxed at 55% on any amount taken above the LTA. This measure ensures that, in such cases, these lump sums are instead taxed at an individual’s marginal rate of income tax.

So is £268k the max you can take out as a lump sum? Or will this be increased?

This tax incentive is very much targeted at the senior doctors who are on a defined benefit pension scheme where they cannot come out of their pension scheme and take a cash equivalent sum. It means, on top of paying income tax at marginal rate of up to 45%, they are taxed at 55% for every pound above LTA on their pension. Including N.I., they are then taxed at over 100%.

Taking away the LTA threshold then means they won't get taxed the extra 55% when they carry on working.

When they come to take their pension, they will still only get the £268k tax free element except where their value has been protected.

Any lump sum or pension withdrawal over the £268k is taxed at their marginal rate. By removing the LTA threshold, they can continue to grow their pensions with the tax incentives but when they are taking their pension, they may now find themselves paying higher rate tax.

That's quite a comfortable position to be in but it is worth bearing in mind i.e. every incremental pound saved in the pension doesn't get 25% tax free and could be taxed at 40% on withdrawal.

[Rufus Stone]

Also note, that if you have registered for LTA protection and now start contributing again that protection is cancelled, meaning your PCLS reverts to the new lower cap.

[Abdul Abulbul Amir]

bennno said:

bennno said:

So let’s say I’ve theoretically got circa 30k going in at source.

If I want to increase to 60k, do I need to pay an extra 30k after tax and reclaim tax at end of tax year - or can I pay net and it gets topped up - how does this work……?

Can anybody guide on this?

You need to find out if you're paying in via salary sacrifice, or either "net pay" or "relief at source".

[bennno]

Abdul Abulbul Amir said:

You need to find out if you're paying in via salary sacrifice, or either "net pay" or "relief at source".

Sorted now. Relief at source.

[Abdul Abulbul Amir]

bennno said:

Abdul Abulbul Amir said:

You need to find out if you're paying in via salary sacrifice, or either "net pay" or "relief at source".

Sorted now. Relief at source.

ok, so tax return or call to hmrc is needed.

[Cupid-stunt]

TriumphStag3.0V8 said:

Cupid-stunt said:

gotoPzero said:

Jockman said:

You sure?

https://www.gov.uk/government/publications/increas...

Seems pretty solid on the Govt website. Apologies if I’m misreading.

Yes I am sure Everything I said is still correct. The article you linked is from 2021. Is now 2023 and its still not been passed into law.

The article also mentions the date (its Nov 21) that I was talking about.

So in theory, if and when this is passed ( I am not saying it wont be but its not yet) then this may be something that does not effect a lot of people.

Also, as time goes on, they are getting too close to the 2028 date. Personally I think we might see this pushed to early 2030s.

The LTA is the maximum amount of tax relievable pension savings an individual can benefit from over the course of their lifetime. Individuals may contribute to their pension over these limits,but they will be subject to a tax charge on the amount above the allowance. The excess is taxed either at 55% where taken as a lump sum, or at 25% where taken as pension. Most individuals are subject to the standard LTA. However, when the LTA was introduced, and each time it has been reduced, protections have been offered to safeguard individuals who had already built-up significant pension savings on the expectation of a certain level of LTA. This measure ensures that nobody will face an LTA charge from April 2023. At a future fiscal event, the government will make the necessary changes to entirely remove the LTA from pensions tax legislation. Consequently, this measure also removes the need for individuals to rely on protections from previous decreases to the LTA.

Individuals may be able to receive to a tax-free lump sum when they become entitled to their pension benefits: a pension commencement lump sum (PCLS). The maximum amount that most individuals can claim as a PCLS is currently 25 per cent of their available LTA at the time this sum is taken. This measure sets a PCLS upper monetary cap of £268,275 (25 per cent of the current LTA). However, those individuals who already have a protected right to take a higher PCLS will continue be able to do so.

For some individuals, lump sums which are tax-free up to the LTA are taxed at 55% on any amount taken above the LTA. This measure ensures that, in such cases, these lump sums are instead taxed at an individual’s marginal rate of income tax.

So is £268k the max you can take out as a lump sum? Or will this be increased?

It's a good question, it does read that way. Unlimited pot, but limited tax free sum. Need to see more detail as it comes out.

This reads as though there is no max ....

IFS reckon it is a scam = increaseing /scrapping LTA means saving on inheritance tax.

[ArmaghMan]

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.

As a percentage of the total population I suspect its a tiny amount.
Real world difference...absolutely. Next time you or your kids are ill and can't get GP appointment part of the reason will be that your GP is working reduced hours for tax reasons (Mrs. AM cut to 3 1/2 days a week).
All of our GP friends are ready to walk, none of them are even 60 yet.
We are NOT extremely wealthy, far from it but losing half of what you earn in tax when you have enough to do you makes you focus on the work/ life balance.

[Countdown]

I think for GPs and senior Doctors there is a combination of factors at work;

High salaries (over £100k) combined with a DB pension scheme mean that it's easy to hit the LTA. High salaries combined with a DB scheme also allows early retirement and a decent pension without the need to work until they're 65

[bennno]

Countdown said:

I think for GPs and senior Doctors there is a combination of factors at work;

High salaries (over £100k) combined with a DB pension scheme mean that it's easy to hit the LTA. High salaries combined with a DB scheme also allows early retirement and a decent pension without the need to work until they're 65

Somethings gone very wrong with whole doctor situation, nobody seems to have a specific doctor any more, its a pot luck 8am scramble for an appointment, weekends forget it, home visits - don't be daft. Meanwhile sufficent earnings and copper bottomed pension to retire very early.

[djc206]

bennno said:

Somethings gone very wrong with whole doctor situation, nobody seems to have a specific doctor any more, its a pot luck 8am scramble for an appointment, weekends forget it, home visits - don't be daft. Meanwhile sufficent earnings and copper bottomed pension to retire very early.

Is it very early? Long hours, stress and shift work. Seems like mid to late 50’s is about right to me.

[Jockman]

Cupid-stunt said:

This reads as though there is no max ....

IFS reckon it is a scam = increaseing /scrapping LTA means saving on inheritance tax.

Remember you lose your Residence Nil Rate Band for Estates between £2m to £2.35m.

First world taper issue, mind.

[loafer123]

ArmaghMan said:

…but losing half of what you earn in tax when you have enough to do you makes you focus on the work/ life balance.

By the time top rate taxpayers pay NI, that’s what they pay, and for many, due to the taper, without the ability to put money in their pension tax free.

I’m not suggesting sympathy is required, but it is another reason why the country has lost its entrepreneurial edge.

[okgo]

If retire even sooner with a greater ability to pay more in

Sadly one or both of us are tapered out of a year goes alright, so actually the new scheme could help there too. So no, 100% will not be working longer because of this.