Pensions, again?
Now, I like to think I am not a particularly cynical person but, when it comes to discussions of pensions, think of the most cynical person in the world; I am more cynical than that.
My starting point is this: Anything written by anybody on the subject of pensions "policy" etc. is 100% rubbish! Whatever it says, whoever wrote it. Harsh? Possibly, but likely a realistic starting point IMO.
So, with that in mind...
TUK020 wrote:A lot of us here on this site are trying to plan for the long term, but pensions legislation seems to be in turmoil at the moment.
At the moment? It has been in turmoil since the 1980s, remember those TV ads of some bloke doing a Houdini impression? We've never looked back since. Then high inflation was knocked on the head. Did nobody notice?
TUK020 wrote: This thread is an attempt to get some "wisdom of the crowds" on what is likely to happen around pensions legislation. This is not about what is the current (overcomplicated) legislation, but about what is likely to happen. I lay out some thoughts on what might happen, and ask those with more knowledge and insight to contribute and improve things:
Perspective
The while concept of LTA is flawed, and at its most recent level (in combination with the personal income tax allowance clawback threshold starting at 100k) created a significant work disincentive. This shows up in the media as legions of doctors working part time and retiring early, but is effective across the board with many high earning professionals with good pension provision.
The LTA also introduces significant complexity in pension planning/provision and taxation.
One of the major considerations in pension planning now is the exemptions of SIPPs from IHT. While my offspring would benefit from this, I cannot really fathom the rationale behind this.
Yes... Could this be part of the 'issue'? I am old enough to remember when pensions were just pensions. Anybody else here remember that too? (They still mostly are with those "golden" DB pensions). Then there was Maxwell...
TUK020 wrote:Thoughts on likely outcomes
I think the abolition of the LTA is a neat trap the Tories have laid for Labour, who have promptly walked into it. When it becomes clearer on the implications of reintroducing this, I think the Labour might back off, or more likely fudge with further complications.
I do think this is the likely death knell of the IHT exemption of SIPPs.
Nothing wrong with that, IMO, if individual "pensions" are going to survive the pensioner.
TUK020 wrote:I also think that the cap on tax relief on contributions will be tightened, possibly in the form of limiting the rate of relief to a flat rate.
Thoughts on desirable but unlikely outcomes
As pensions are very long term planning for people, it would be great if there were some cross party agreement on topics of a) principles that won't change, b) thresholds that will be subject to gradual adjustment, and c) thresholds that are up to the government of the day.
Yes. Wouldn't it be nice?
TUK020 wrote:a) It would be great to see agreement that money put into pension pots is not subject to any taxation while in the pension pot, or any extra taxation on withdrawal.
Fine on the first part, no to the second part. You want tax free money? Of course you do! But why should you have it but nobody else? Makes no sense.
TUK020 wrote:b) Age limit on access to pensions might rise, but possibly this should be on a State Pension Age -10 basis?
c) Tax relief on contributions etc
Yes to tax relief. See above - personally I have no fundamental issue with HRT relief for HR taxpayers (and I was not a HR taxpayer!). The thing is, this has now become a 'thing' for two reasons:
1. It has become generally known that tax is not paid on pension contributions - originally it wasn't, pensions were all a mystery.
2. This has become known, via the news media, as a 'perk' (I blame the 1980s - see above). So it's now "
'snot fair!" territory.
Probably not too helpful, still... I tend to believe in what somebody once said: "
It's tough to make predictions. Particularly about the future."