Pension LTA under threat?
Discussion
Any thoughts on the reports in most papers today that gov't is looking at reducing the lifetime allowance to as low as £800k? https://www.cityam.com/treasury-planning-pensions-...
I suppose they're just kite-flying at this stage. Most historic pension changes haven't had retrospective effect but there's no guarantee that would apply to this one. Perhaps they could apply it just to new tranches of pension crystallisation? Maybe the threat of this will prompt people to bite the bullet and crystallise everything before autumn - so enormously boosting this year's tax revenues from the excess tax charge?
Personally I feel it's high time they updated the LTA conversion factor for DB pensions. I'm sure it was never intended to be set in stone for all time. Raising this could have a similar effect, albeit with similar retrospection issues, but I doubt it will happen as the gov't so likes to protect the public sector from the commercial realities of pension funding.
I suppose they're just kite-flying at this stage. Most historic pension changes haven't had retrospective effect but there's no guarantee that would apply to this one. Perhaps they could apply it just to new tranches of pension crystallisation? Maybe the threat of this will prompt people to bite the bullet and crystallise everything before autumn - so enormously boosting this year's tax revenues from the excess tax charge?
Personally I feel it's high time they updated the LTA conversion factor for DB pensions. I'm sure it was never intended to be set in stone for all time. Raising this could have a similar effect, albeit with similar retrospection issues, but I doubt it will happen as the gov't so likes to protect the public sector from the commercial realities of pension funding.
Doesn't feel like a particularly immediate threat on LTA - didn't Rishi announce in the last budget that it was frozen for this parliamentary term ? Would therefore appear an unnecessary u-turn.
The DB factor is a possibility - 20x seems a little outdated with most transfer values being more like 30x
The biggest loophole to me seems to be that a SIPP is outside your estate for IHT and can be passed on through the generations as a fund to draw from.
The DB factor is a possibility - 20x seems a little outdated with most transfer values being more like 30x
The biggest loophole to me seems to be that a SIPP is outside your estate for IHT and can be passed on through the generations as a fund to draw from.
millen said:
I suppose they're just kite-flying at this stage. Most historic pension changes haven't had retrospective effect but there's no guarantee that would apply to this one. Perhaps they could apply it just to new tranches of pension crystallisation? Maybe the threat of this will prompt people to bite the bullet and crystallise everything before autumn - so enormously boosting this year's tax revenues from the excess tax charge?
The problem is if they don't make it effective in a short timeframe then it's not actually going to bring in any revenue for a few years, although maybe he doesn't mind if he knows there's few hundred million coming in to the Treasury from some future date. I can see that there would be a mad rush as everyone with more than 800k frantically crystallises & takes the TF lump sum before the new limit comes in. millen said:
IPersonally I feel it's high time they updated the LTA conversion factor for DB pensions. I'm sure it was never intended to be set in stone for all time. Raising this could have a similar effect, albeit with similar retrospection issues, but I doubt it will happen as the gov't so likes to protect the public sector from the commercial realities of pension funding.
For me this is key. It's apalling that the Civil Service retains such inequitable pension treatment while the rest of us get raided repeatedly. They need to feel the pain.Mr Pointy said:
For me this is key. It's apalling that the Civil Service retains such inequitable pension treatment while the rest of us get raided repeatedly. They need to feel the pain.
My recollection is that it's based on a recommendation of the Government Actuary's Department but presumably someone at DWP has to commission a review of the conversion factor. And since when have turkeys voted for Xmas?!nickfrog said:
randlemarcus said:
Carbon Sasquatch said:
The biggest loophole to me seems to be that a SIPP is outside your estate for IHT and can be passed on through the generations as a fund to draw from.
Shhh. Don't remind them 
Still outside of IHT & still plenty of people who will pay no or low tax on it.
Carbon Sasquatch said:
More useful before 75 as the money can be down down tax free by the beneficiary - over 75 and they pay tax at their marginal rate when they choose to draw it down.
Still outside of IHT & still plenty of people who will pay no or low tax on it.
Thanks for that. So even if death after 75 and they only drawdown it down up to the income tax allowance and have no other income then they get that drawdown tax free every year? Still outside of IHT & still plenty of people who will pay no or low tax on it.
as NHS employee i am seeing more and more doctors quitting pension scheme and retiring as have done overtime and owe money back due to taxation/pension contributions
telegraph on sat said 50,000 people left NHS pension scheme in last year an increase of 22%
it does not help that every few years the rulkes completely change with the only certain being you are retiring later and later...... which is putting all the young people from joining pension scheme or even NHS!
telegraph on sat said 50,000 people left NHS pension scheme in last year an increase of 22%
it does not help that every few years the rulkes completely change with the only certain being you are retiring later and later...... which is putting all the young people from joining pension scheme or even NHS!
nickfrog said:
Thanks for that. So even if death after 75 and they only drawdown it down up to the income tax allowance and have no other income then they get that drawdown tax free every year?
Yep - under 75 tax free - over 75 treated as incomehttps://www.gov.uk/tax-on-pension-death-benefits
tty thing to do, although arguably they have already done this by freezing LTA increases.Carbon Sasquatch said:
The biggest loophole to me seems to be that a SIPP is outside your estate for IHT and can be passed on through the generations as a fund to draw from.
Not sure it's a loophole for funds you can't access or haven't had the benefit of to be included in your estate.To me, it seems similar to life insurance written into trust, which also falls outside of your estate.
LeoSayer said:
Not sure it's a loophole for funds you can't access or haven't had the benefit of to be included in your estate.
To me, it seems similar to life insurance written into trust, which also falls outside of your estate.
If you're over 55 you can access a SIPP. You can chose what you draw down & what you leave inside the wrapper.To me, it seems similar to life insurance written into trust, which also falls outside of your estate.
It's a loophole because the trustees can override your wishes on who inherits & therefore outside the estate, even though in almost all cases, your nominated beneficiaries inherit it.
Mr Pointy said:
For me this is key. It's apalling that the Civil Service retains such inequitable pension treatment while the rest of us get raided repeatedly. They need to feel the pain.
There'd be a tiny percentage of Civil Servants anywhere near the LTA however it was calculated. My wife's Civil Service pension is £300/mth.As others have said, Doctors, Consultants etc in the NHS are hitting it using the current calculation - I saw a newspaper article about one who'd been a Consultant from a relatively young age and two financial advisors commenting both said it was finanically pointless for her to continue to work for the NHS.
Mr Pointy said:
The problem is if they don't make it effective in a short timeframe then it's not actually going to bring in any revenue for a few years, although maybe he doesn't mind if he knows there's few hundred million coming in to the Treasury from some future date. I can see that there would be a mad rush as everyone with more than 800k frantically crystallises & takes the TF lump sum before the new limit comes in.
That wouldn't happen though. Every time the allowance has been lowered there has also been the option to freeze existing pots at the old rate, so there is no need to crystallize and take the lump sum.halo34 said:
Is there a reason they wont look at means testing the state pension too, I mean even if the threshold was set quite high, surely its time to have a look @ that.
It would be complicated - how do you test it ? Total pension income is already subject to income tax. What do you test after that ? Savings that have had tax paid on the way in ? Property or other assets ? The amount held in a SIPP ?p1doc said:
as NHS employee i am seeing more and more doctors quitting pension scheme and retiring as have done overtime and owe money back due to taxation/pension contributions
telegraph on sat said 50,000 people left NHS pension scheme in last year an increase of 22%
it does not help that every few years the rulkes completely change with the only certain being you are retiring later and later...... which is putting all the young people from joining pension scheme or even NHS!
Its a big problem in the NHS which will only get worse. At a time of long waiting lists further exacerbated by Covid the government seem hell bent on driving Drs/consultants towards early retirement or working less and less so not to get penalised heavily for going over the LTA which they can do nothing about, having been signed up to it an early age and x% contributed the compound interest soon reaches the LTA by the time you hit 55. Why would you want to put the extra hours in to clear the waiting lists if you get hit heavily in your pay packets that its just not worthwhile doing it.telegraph on sat said 50,000 people left NHS pension scheme in last year an increase of 22%
it does not help that every few years the rulkes completely change with the only certain being you are retiring later and later...... which is putting all the young people from joining pension scheme or even NHS!
Carbon Sasquatch said:
LeoSayer said:
Not sure it's a loophole for funds you can't access or haven't had the benefit of to be included in your estate.
To me, it seems similar to life insurance written into trust, which also falls outside of your estate.
If you're over 55 you can access a SIPP. You can chose what you draw down & what you leave inside the wrapper.To me, it seems similar to life insurance written into trust, which also falls outside of your estate.
It's a loophole because the trustees can override your wishes on who inherits & therefore outside the estate, even though in almost all cases, your nominated beneficiaries inherit it.
Guess who's 55 in May 28
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