Crystal Ball: What is going to happen to pensions legislation?

[scotview]

An article in the Telegraph today saying that Hunt is looking into getting pension funds to take more risk and invest in things like "infrastructure". There seems is to be no end to this interference.

https://www.telegraph.co.uk/business/20 ... d-manager/

Pity they don't legislate to put public sector and MP's pensions into DC schemes.

[ursaminortaur]

An article in the Telegraph today saying that Hunt is looking into getting pension funds to take more risk and invest in things like "infrastructure". There seems is to be no end to this interference.

https://www.telegraph.co.uk/business/20 ... d-manager/

Pity they don't legislate to put public sector and MP's pensions into DC schemes.

Governments have talked about getting/forcing pension funds to invest in infrastructure projects for years with no substantial effect

See for instance this from 2016

https://www.havenifa.co.uk/uk-government-eyes-pension-funds-long-term-infrastructure-projects/

According to a report published late on Sunday by The Telegraph, the British government is right now looking to gain access to domestic pension funds, as a means by which to finance an array of projects. From broadband expansion to railway development and right through to nuclear power, they apparently have their eye on the capital put away by pension savers to finance a number of ventures.

The report quotes an unnamed source from within the government as stating that for the pension providers that took part in the deals, the returns they could expect would be superior to those of standard government bonds. In addition, they also spoke of the possibility that some of the initial risks of the projects would be underwritten by Britain’s finance ministry.

“If you’ve got a long-term infrastructure need why wouldn’t we be looking to put sensible money into that,” the newspaper reported the source as saying.

MPs pensions could be moved to a DC based scheme since, like the LGPS (local government pension scheme) it is a funded scheme. However most of the other public sector pension schemes are pay as you go schemes where the government just take the employee contributions and don't really make an employer contribution. If the government were to switch these to a DC scheme either your taxes or government borrowing would have to go up as the government would have to instead funnel the employee contributions to a real pension fund and start making real employee contributions to that fund but would still need to pay out the promised pensions to those already retired and those who had already built up benefits when they retired. Hence such a switch is never likely to occur.

[flyer61]

Maybe people are looking at this the wrong way. What will the pension industry put up with. It has a big say in what we end up with....sadly.

Looking at the optics is quite an interesting reflection of where Britain finds itself. Mired in a 'levelling' down' agenda. Where we have a party in power which used to believe in aspiration and those who worked could (in theory) enjoy the fruits on their endeavours. Now what have we got, a PM who has been profligate in the extreme and a chancellor who wants everybody at the coal face. Taxation across the board that actually is a huge disincentive to work.

Whatever happens with pensions don't bet your retirement on it.

Less than 12 months till early retirement....

[Urbandreamer]

Less than 12 months till early retirement....

14 calendar days or 6 working days for me.

I couldn't agree more with the rest of your post (ignoring comments about a particular political party).
The ENTIRE reason for things like the LTA, minimum age of access and contribution limits, is to require people to continue working, and hence paying taxes.

Sadly I can understand the reasons that the government wants to make it's citizens wage slaves. That doesn't mean that I want to be one any longer.

Unfortunately for the rest of the country, those reasons are not going away. I believe that it's going to get harder and harder to retire in the future as governments of various hues look at the books and realize that they can't even fund the existing promises.

This is the "Pensions - Practical Problems" board, which may be apt. I suggest that, while the young shouldn't ignore pensions, they need to look at the alternatives too.

[Alaric]

Governments have talked about getting/forcing pension funds to invest in infrastructure projects for years with no substantial effect

The obvious things to look at are the various rules and conventions that almost force invested defined benefit schemes to hold Government Bonds. But with the increased prevelance of defined contribution schemes in the private sector, if you want investment in infrastructure, it would be necessary to convince individual scheme members to instruct the scheme managers to invest their contributions and contributions made on their behalf in such investments.

I think major UK annuity providers such as Legal & General invest some of their funds backing annuities into infrastructure. Like defined benefit pension funds, they have to work their way round solvency rules which can make investing in riskier assets (in the default sense) problematic.

[CliffEdge]

Maybe people are looking at this the wrong way. What will the pension industry put up with. It has a big say in what we end up with....sadly.

Looking at the optics is quite an interesting reflection of where Britain finds itself. Mired in a 'levelling' down' agenda. Where we have a party in power which used to believe in aspiration and those who worked could (in theory) enjoy the fruits on their endeavours. Now what have we got, a PM who has been profligate in the extreme and a chancellor who wants everybody at the coal face. Taxation across the board that actually is a huge disincentive to work.

Whatever happens with pensions don't bet your retirement on it.

Less than 12 months till early retirement....

I got out my 50mm lens. I guess that qualifies as optics. I looked at it for three hours but I'm none the wiser regarding pension legislation. I didn't need to look at it regarding levelling down because decline has been inevitable since Brexit and the government is well aware of that fact but has to make some effort to relabel decline as something virtuous. Noone with any wits is fooled.
A catastrophe, self inflicted. That's where we are.

[absolutezero]

What will happen to pensions legislation?

Fairly simple.
Labour will nationalise all private pension funds and give your money to the feckless who have only had 50 years to prepare for this unforeseen eventuality.

"A fair windfall tax on those with the broadest shoulders." Or words to that effect.

Think it couldn't happen? Really?

[csearle]

Moderator Message:
There is another place for overtly political discussion. Please try to avoid heating things up here any further. Thanks - Chris

[Dod101]

Less than 12 months till early retirement....

14 calendar days or 6 working days for me.

I couldn't agree more with the rest of your post (ignoring comments about a particular political party).
The ENTIRE reason for things like the LTA, minimum age of access and contribution limits, is to require people to continue working, and hence paying taxes.

Sadly I can understand the reasons that the government wants to make it's citizens wage slaves. That doesn't mean that I want to be one any longer.

Unfortunately for the rest of the country, those reasons are not going away. I believe that it's going to get harder and harder to retire in the future as governments of various hues look at the books and realize that they can't even fund the existing promises.

This is the "Pensions - Practical Problems" board, which may be apt. I suggest that, while the young shouldn't ignore pensions, they need to look at the alternatives too.

You sound like an intelligent fellow and of course I cannot blame you for organising your affairs so that you can take early retirement, but what if the entire country did that? We would be a very poor country in almost every sense of that term.

Maybe better to turn the question the other way. Why do people want to leave their jobs early? Why do they see themselves as wage slaves? What is wrong with the workplace that they want to run away from it? Or that could be 'How can you afford to run way from the workplace so early? Would you rather be a slave on a farm or a weaver or dyer or something, working until you drop?'

It is not the government that wants its citizens to be wage slaves. It is that that is the only way we can even vaguely maintain our standard of living in this country (or any other for that matter) If everyone retired at say 45/50 the standard of living of this country would soon drop.

I am not in the least woke, but a granddaughter of mine has just completed a dissertation on stress in the workplace. Whether I like it or not that seems to be an issue which may or may not contribute to early retirement. She compares working conditions in this country with those in Sweden and concludes that four day weeks with the same income as the old five day week can produce the same output with much less stress (a very short summary of but one issue) In my day, I would have told the person under stress, just to get on with it but I must say that this may not have been a positive way of trying to get things on to a better footing.

If a career and salaries and pensions are geared to working until say 60 and the individual can afford to retire at 50 or earlier that is one thing but to want to retire at that age? Well something is wrong.

Dod

[Itsallaguess]

Why do people want to leave their jobs early?

Why do they see themselves as wage slaves? What is wrong with the workplace that they want to run away from it?

Or that could be 'How can you afford to run way from the workplace so early? Would you rather be a slave on a farm or a weaver or dyer or something, working until you drop?'

It is not the government that wants its citizens to be wage slaves. It is that that is the only way we can even vaguely maintain our standard of living in this country (or any other for that matter)

If everyone retired at say 45/50 the standard of living of this country would soon drop.

I am not in the least woke, but a granddaughter of mine has just completed a dissertation on stress in the workplace. Whether I like it or not that seems to be an issue which may or may not contribute to early retirement.

She compares working conditions in this country with those in Sweden and concludes that four day weeks with the same income as the old five day week can produce the same output with much less stress (a very short summary of but one issue) In my day, I would have told the person under stress, just to get on with it but I must say that this may not have been a positive way of trying to get things on to a better footing.

If a career and salaries and pensions are geared to working until say 60 and the individual can afford to retire at 50 or earlier that is one thing but to want to retire at that age? Well something is wrong.

Might it help if you consider things in a slightly different way Dod?

If you accept that your granddaughter's dissertation has been worthwhile, and that one of the valid outcomes of it has been in identifying a possible 'work/life middle ground', where a 'compressed' 4-day working week can deliver the same 'output', whilst also importantly helping to provide a better work/life balance for the employee, then might you be able to see the same thing in terms of some early-retirement situations?

If a potential early-retirement situation can be generated by someone working very hard during a shorter-than-normal working life, and potentially generate 'the same lifetime output' in a similar way to that shorter working week study, then why can't the same potential 'output-balance' of that early-retirement situation be appreciated in the same context as that 4-day week?

I think what is often still a very long-term 'working hard' phase of most early-retirement situations is often very much ignored when such early-retirees receive this type of criticism, and I find it interesting that you seem to be willing to accept the notion of a 4-day week as still achieving some semblance of useful 'work/output balance', but don't seem to recognise the potential for a similar 'work/output balance' situation for early-retirees over longer, multi-year periods...

Isn't this, after-all, just their own equivalent of a working-lifetime '4-day week', with the associated 'working-harder output boost' that you seem to accept can be a benefit in the week-based version of it?

Cheers,

Itsallaguess

[Dod101]

Why do people want to leave their jobs early?

Why do they see themselves as wage slaves? What is wrong with the workplace that they want to run away from it?

Or that could be 'How can you afford to run way from the workplace so early? Would you rather be a slave on a farm or a weaver or dyer or something, working until you drop?'

It is not the government that wants its citizens to be wage slaves. It is that that is the only way we can even vaguely maintain our standard of living in this country (or any other for that matter)

If everyone retired at say 45/50 the standard of living of this country would soon drop.

I am not in the least woke, but a granddaughter of mine has just completed a dissertation on stress in the workplace. Whether I like it or not that seems to be an issue which may or may not contribute to early retirement.

She compares working conditions in this country with those in Sweden and concludes that four day weeks with the same income as the old five day week can produce the same output with much less stress (a very short summary of but one issue) In my day, I would have told the person under stress, just to get on with it but I must say that this may not have been a positive way of trying to get things on to a better footing.

If a career and salaries and pensions are geared to working until say 60 and the individual can afford to retire at 50 or earlier that is one thing but to want to retire at that age? Well something is wrong.

Might it help if you consider things in a slightly different way Dod?

If you accept that your granddaughter's dissertation has been worthwhile, and that one of the valid outcomes of it has been in identifying a possible 'work/life middle ground', where a 'compressed' 4-day working week can deliver the same 'output', whilst also importantly helping to provide a better work/life balance for the employee, then might you be able to see the same thing in terms of some early-retirement situations?

If a potential early-retirement situation can be generated by someone working very hard during a shorter-than-normal working life, and potentially generate 'the same lifetime output' in a similar way to that shorter working week study, then why can't the same potential 'output-balance' of that early-retirement situation be appreciated in the same context as that 4-day week?

I think what is often still a very long-term 'working hard' phase of most early-retirement situations is often very much ignored when such early-retirees receive this type of criticism, and I find it interesting that you seem to be willing to accept the notion of a 4-day week as still achieving some semblance of useful 'work/output balance', but don't seem to recognise the potential for a similar 'work/output balance' situation for early-retirees over longer, multi-year periods...

Isn't this, after-all, just their own equivalent of a working-lifetime '4-day week', with the associated 'working-harder output boost' that you seem to accept can be a benefit in the week-based version of it?

Cheers,

Itsallaguess

Firstly, can I say that I do not intend any criticism of those who can afford to retire early and if my comments came across that way I am sorry. I have not heard any of those retiring early make the claim that they have a done a lifetime's work in say 2/3rds of the time others take and frankly I doubt that that really applies anyway, although I have no evidence for that. Rather they compress a working life's savings into that shorter timescale.

I would think that there is little doubt, in fact it seems obvious, that some people will have much higher productivity than others, otherwise we would live in a drab Communist like society. But our society and general standard of living depends on that fact I would imagine. What I think we need to do is make the workplace altogether a more enjoyable and relaxed place for the majority of workers. I am very disappointed that so many are very unhappy with it as is. I am less concerned about 'wage slaves'. Society has been like that since Adam I would imagine. It is probably also the case that those who could, have always retired early if they wanted to, but for many it is not an option. I write as one who retired at 52, but my career and conditions, including pension arrangements, were geared to age 55 anyway as I lived for most of my working life in the tropical heat of the Far East. Even that has changed now with the advent of widespread air conditioning and many work on to around 60.

I think there is something in the idea of making workplaces less stressful and altogether more welcoming and some of these admittedly academic studies may be worth taking a look at. Granddaughter is completing an Economics degree and this sort of thing comes up in it so as hopefully these are the leaders of tomorrow, there may be some developments in that area.

Generally, it appals me that so many seem unhappy in the workplace. I enjoyed my work. A bit like Warren Buffett has said, I used to metaphorically skip to work but whether it is significant, very few worked beyond about 8.30 to around 5.30 and we had a good life outside these hours. (the official hours were 9-5 and working on Saturday mornings until 12 noon until it was eventually recognised that it was a waste of effort all round.)

Dod

[scotview]

We shouldn't forget that we live in a financially rarefied atmosphere in this group.

With the bulk of the population on something like £25k and struggling with a "new normal" in the cost of living, looking forward to an early retirement, or any retirement for that matter, isn't too high on their enforced priorities list.

[XFool]

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...

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?

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...

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.

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?

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.

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."

[CliffEdge]

The only real jobs are mainly in the NHS and education, police etc. Most people are faking it and know their jobs are pointless, hence the stress and desire to escape. Those in real jobs feel unappreciated for their genuine work and societal contribution. Contempt for such genuine value is frequently stated on here.

[Urbandreamer]

You sound like an intelligent fellow and of course I cannot blame you for organising your affairs so that you can take early retirement, but what if the entire country did that? We would be a very poor country in almost every sense of that term.

Maybe better to turn the question the other way. Why do people want to leave their jobs early? Why do they see themselves as wage slaves? What is wrong with the workplace that they want to run away from it? Or that could be 'How can you afford to run way from the workplace so early? Would you rather be a slave on a farm or a weaver or dyer or something, working until you drop?'

Dod

With respect to dying, weaving and farming. VAST hoards of people no longer do those things. This is thanks to the engineers, and was true before I was born when a Mr M Kaynes predicted that, were we to require full employment, then people could not work as many days as had been required. Of course it was true before he made the statement, during the time of lud, when large numbers of people were concerned about their incomes.

One of the main reasons that I want early retirement is that, until fairly recently, regardless of Mr Keynes predictions, employers found full time workers far preferable to any form of flexible working.

To be blunt, people talk on and on about "unforeseen consequences". RUBBISH in most cases those consequences were in no part unforeseen, simply undesirable. Time and time again we have seen governments warned about likely reactions, yet when these re-actions happen, it's always "unforeseen".

It is of course quite possible that I shall be a productive member of society in my retirement, but I will be able to pick and chose what I do with my time.

[Wuffle]

The 'working hard', 'compressing lifetimes work into shorter periods' arguments are valid.
However, as someone who inhabits the world of the low paid but reads here all about the travails of people hitting the LTA, the significant influence is clear.
It is analogous to the fixed cost/variable cost analysis for businesses.
Staying alive and functioning in a modern Western society has a minimum cost. Saving can only come from what is above that. Hence the positive effects of compression. But the biggie is increased rate of earnings.
A 50 grand job is not a bit better than a 30 grand job, it has a way better disposable element.
A progressive tax system, while seemingly tough on the higher paid, just redressed this. At least it does until you can sidestep it through a pension system.
Fiendish buggers the middle and upper class aren't they?

W.

[TUK020]

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.

Extra taxation on withdrawal

Not arguing for tax free withdrawal, but what I was trying to say was "Extra" i.e. additional charges over and above your normal taxation, because the source is from a pension