Pension LTA under threat?

[LeoSayer]

Carbon Sasquatch said:

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 ?

Adding State Pension to the lifetime allowance using the 20x factor would seem the obvious way.

[Mr Pointy]

jrock78 said:

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.

Well boo hoo, rich people moaning they have too much money.

[p1doc]

Dinoboy said:

Sorry to take this off thread but I believe the age 55 rule is due to change in early 2028, do you know if this includes public sector superannuation pensions?
Guess who's 55 in May 28

55 in november-supposedly BMA (doctors union) is trying to get NHS to keep 55 as per police fire brigade but likely not now till 2028 i reckon lol

[Jawls]

The proposals in the press yesterday were just a front in the Johnson/Sunak war over political economy, no chance of them reaching legislation especially given the Chesham & Amersham result. The proposed changes would whomp relatively wealthy middle class people, prime traditional Tories.

I wouldn’t lose any sleep over this. Not even this government is daft enough to do this.

[Mr Pointy]

p1doc said:

Dinoboy said:

Sorry to take this off thread but I believe the age 55 rule is due to change in early 2028, do you know if this includes public sector superannuation pensions?
Guess who's 55 in May 28

55 in november-supposedly BMA (doctors union) is trying to get NHS to keep 55 as per police fire brigade but likely not now till 2028 i reckon lol

Of course they are. "Hey, we're special, let the rest of the populace work their nuts off for longer".

[xeny]

Mr Pointy said:

Well boo hoo, rich people moaning they have too much money.

People who spent a bunch of years working silly hours and getting trained at considerable public expense.

Giving them incentives to stop working earlier doesn't seem a good use of that investment of public funds.

[GadgeS3C]

LeoSayer said:

Carbon Sasquatch said:

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 ?

Adding State Pension to the lifetime allowance using the 20x factor would seem the obvious way.

Isn't that the same as reducing the LTA by ~£190k? Given most folks exceeding the LTA are likely to be getting state pension I'd consider the LTA already factors in state pension. State pension is effectively means tested by the income tax bands. Obviously all of the above could be tightened.

[p1doc]

xeny said:

People who spent a bunch of years working silly hours and getting trained at considerable public expense.

Giving them incentives to stop working earlier doesn't seem a good use of that investment of public funds.

exactly i remember doing weekend shifts starting at 8am sat finished lunchtime monday being only junior doctor on for medical or surgical
pension was supposed to be pay off for this but they keep changing rules and goalposts such as 2008 once a generation change since 1995 oh not much take up in working 5yrs longer still paying same if not more contributions and get less so 2015 compulsory change for everyone which has now been classified as age discriminatory by court
i dont mind doing the work if reward at retirement but now working harder and reward goalpost keeps moving with most financial advisers/accountants saying should retire asap to avoid tax charges because worked full time so hitting LTA but i am only f/t GP in my practice so if i go no one left to do my work .....

[NickCQ]

xeny said:

People who spent a bunch of years working silly hours and getting trained at considerable public expense.
Giving them incentives to stop working earlier doesn't seem a good use of that investment of public funds.

It's a tricky situation. There is a generation of public sector workers that effectively "won the lottery" through defined benefit pensions - because of interest rates and longevity, the transfer values are now greatly in excess of the contributions they made. Once someone is already rich, it gets that much harder to motivate them!

It seems inequitable that junior doctor and nursing staff wages should be squeezed to pay for superannuated consultants' pensions. Of course, no tax was ever paid on the uplift in DB transfer values...

[p1doc]

NickCQ said:

It's a tricky situation. There is a generation of public sector workers that effectively "won the lottery" through defined benefit pensions - because of interest rates and longevity, the transfer values are now greatly in excess of the contributions they made. Once someone is already rich, it gets that much harder to motivate them!

It seems inequitable that junior doctor and nursing staff wages should be squeezed to pay for superannuated consultants' pensions. Of course, no tax was ever paid on the uplift in DB transfer values...

the whole point of NHS pension was people coming in pay for those going out but because rules have changed you retire now age 60 at better pension and lump sum than someone who is joining now and working to 68
it is very hard to change but surely there must be someway to make it more attractive for people joining or everyone will end up leaving scheme for SIPPs

[NickCQ]

p1doc said:

it is very hard to change but surely there must be someway to make it more attractive for people joining or everyone will end up leaving scheme for SIPPs

It could be worse - they could be in the near-bankrupt Universities pension scheme (USS), which has no government guarantee!

[Dixy]

Mr Pointy said:

Well boo hoo, rich people moaning they have too much money.

This is not about money this is about consultants being effectively fined for going to work. You may think this does not effect you but when you find a lump on your testicle or when your hip gives you constant pain or when the next pandemic hits, who is going to wave their magic healing hands and make your life worth living. But it does not end there all the registrars need the consultants for training so in ten years time there will be even fewer consultants.

[NickCQ]

Dixy said:

This is not about money this is about consultants being effectively fined for going to work.

They are not being "fined" - the marginal tax rate is high but it is still <100%, as I understand it
Not a Pomperipossa situation (https://en.wikipedia.org/wiki/Pomperipossa_in_Monismania)

[Carbon Sasquatch]

I'm also struggling with the "fined" and "forced to retire" type comments - I get that there are fewer tax benefits & a lower net level of earnings, but it's still additional earnings.

Surely the reason you're likely to retire is that you deem the £1M as 'enough' rather than because you can't add more with a tax break.... would increasing the LTA really keep people from retiring ?

[Jawls]

anonymous said:

[redacted]

All that will happen is that this forces wealthy but relatively ordinary people to do very aggressive tax planning. Is that really what this hypothetical policy is supposed to do?

To the extent that voters don’t care, that’s just evidence of most voters being pretty clueless about retirement in an era of DC pensions. 800k is a decent pot (assuming it’s then indexed to inflation) but hardly allows you to live like a pig in fat.

[Carbon Sasquatch]

Jawls said:

All that will happen is that this forces wealthy but relatively ordinary people to do very aggressive tax planning. Is that really what this hypothetical policy is supposed to do?

To the extent that voters don’t care, that’s just evidence of most voters being pretty clueless about retirement in an era of DC pensions. 800k is a decent pot (assuming it’s then indexed to inflation) but hardly allows you to live like a pig in fat.

There's a difference between total retirement savings and a pension pot that allowed gross contributions though..... you could make a somewhat valid argument that the pot you can build with tax relief should only be to a basic income in retirement level. After that, additional savings are just regular savings and taxed on the way in

I'd like a higher LTA than the current one - and the annoying thing is that it's hard to track/predict as it's at crystallisation and not now - so many people are likely to exceed it through growth, but don't realise yet.

[xeny]

Carbon Sasquatch said:

so many people are likely to exceed it through growth, but don't realise yet.

Including some of those currently decrying it as a rich person's problem.

[LeoSayer]

NickCQ said:

Dixy said:

This is not about money this is about consultants being effectively fined for going to work.

They are not being "fined" - the marginal tax rate is high but it is still <100%, as I understand it
Not a Pomperipossa situation (https://en.wikipedia.org/wiki/Pomperipossa_in_Monismania)

It can be >100% marginal tax.

Outlined here:

https://www.bma.org.uk/media/2002/bma-briefing-on-...

[NickCQ]

LeoSayer said:

It can be >100% marginal tax. Outlined here:
https://www.bma.org.uk/media/2002/bma-briefing-on-...

Thanks for sharing this. They don't show their working of how the £13,500 is built up, but I think they are mixing concepts somewhat by comparing marginal tax paid to current year income only (i.e. disregarding the value of pension benefits accrued).

[Carbon Sasquatch]

LeoSayer said:

It can be >100% marginal tax.

Outlined here:

https://www.bma.org.uk/media/2002/bma-briefing-on-...

Even after having read it I'm still confused. They clearly have an agenda and a desired solution, but there are other options. A cliff edge can be removed by being less generous as you approach it as well as being more generous afterwards.

They also mix up the examples - someone can work less hours & have higher pension contributions - maybe so, but then they aren't getting paid for those hours....