Sunak pension tax raid

[Mikhail Liebenstein]

1 hour ago, Young Turk said:

5 million? Presumably most well paid public sector workers will be hit by this (a small pension that increases with inflation would be worth 800k or more) - doctors, lots of teachers, nurses, civil servants, police etc.

Or if you are moderately well paid for 30-40 years and contribute a reasonable chunk, then assuming poor investment returns, you will probably exceed 800k. With high earners or good investment returns, you would exceed it by a lot.

I'm switching to ISAs now, I expect my £700k fund to come in at least £1.5m by the time I can take it, based on a 7% return, which is actually lower than I have achieved. But even at 4% it is over £1m.

[Mikhail Liebenstein]

3 hours ago, byron78 said:

25K a year saved for 25 years?

CEO or public sector?

 

As said, I never put in more than £18k, and started with about £10k PA contributions. But I did start at 24 years ago, and have mostly held equities. By the time I can touch it, I'll have held stocks for 34 years.

[dugsbody]

5 hours ago, byron78 said:

How many of you proles have 800K pension pots?

Every single retired person who has a defined benefit final salary greater than £28k pa. Which is quite I lot I think.

[Dorkins]

17 minutes ago, crash-and-burn said:

"Our job is to keep people out of poverty, not to enrich the middle classes,"

 

I think the problem is the middle classes, generally aren't that rich, and many are going down into that poverty bracket, and if not now then soon.

Letting the middle classes keep a proportion of their wages = bad, should stop

Pumping up property prices to give people who own multiple properties unearned gains = good, keep going

Welcome to Conservative party values circa 2021.

[winkie]

4 hours ago, Si1 said:

Coming from someone who luckily bought a house in North London in the 90s? Seriously?

Who told you that?.... evidence, because I haven't got any.

[captainb]

52 minutes ago, dugsbody said:

Every single retired person who has a defined benefit final salary greater than £28k pa. Which is quite I lot I think.

Will they include the public sector in it?....

[winkie]

4 hours ago, hotblack42 said:

In the last few years thousands, if not tens of thousands, of people have transferred £800k+ lumps out of generous final salary schemes who had 20+ years of service and a middle to high salary.

That is the thing with many pensions........can be worth all sorts until start claiming them, you could say the same with property, worth all manner of valuations until they are sold......only then that is the price.

[The Spaniard]

This might be just the thin end of a very big and protracted wedge.

Perhaps by 2030 most of us will own nothing and we will be happy?

[scottbeard]

6 hours ago, byron78 said:

How many of you proles have 800K pension pots?

Would expect to by retirement age

4 hours ago, byron78 said:

25K a year saved for 25 years?

CEO or public sector?

Investment returns Byron! Markets up 40% last March.  I can’t be the only one who piles money into their pension every time there’s a crisis… 9/11, credit crunch, COVID etc.  You don’t need to put in £800k to have an £800k pot!!

[winkie]

2 hours ago, Young Turk said:

This is because of the housing crisis. 

The government should solve the housing crisis. A big element of this would be to tax landlords and owner occupiers (I would argue the taxes on landlords should be punitive. It's debatable how much owner occupiers should be taxed).

What do you mean by crisis, shortage of supply or is it the cost of buying?........it would be an even bigger crisis if mortgage interest rates were 7% plus at today's prices........as interest rates fell so house prices rose........it is imo the biggest problem is deposit that is now required, once got the deposit, debt now is cheap.........anyone who can't get help with a deposit be it a gift from family or a gift of the surplus income from work you happen to do bonuses etc is at a major disadvantage......the cost of servicing mortgage debt compared with renting is cheap today.

[byron78]

48 minutes ago, scottbeard said:

Would expect to by retirement age

Investment returns Byron! Markets up 40% last March.  I can’t be the only one who piles money into their pension every time there’s a crisis… 9/11, credit crunch, COVID etc.  You don’t need to put in £800k to have an

Should pay for your care costs etc nicely. Well done.

[Young Turk]

56 minutes ago, winkie said:

What do you mean by crisis, shortage of supply or is it the cost of buying?........it would be an even bigger crisis if mortgage interest rates were 7% plus at today's prices........as interest rates fell so house prices rose........it is imo the biggest problem is deposit that is now required, once got the deposit, debt now is cheap.........anyone who can't get help with a deposit be it a gift from family or a gift of the surplus income from work you happen to do bonuses etc is at a major disadvantage......the cost of servicing mortgage debt compared with renting is cheap today.

The high cost of housing, in large part due to the high deposit required (in turn due a combination of factors: low IRs globally, UK specific issues - planning laws, BTL rules and regulations, tax laws) is the housing crisis, as you say.

[winkie]

I can't get over how many today expect or vision a time, think it is their right, their entitlement to get rich from as little effort as possible, or from only a few years hyper gain and pain, gather gamble and invest to sit back and enjoy, out of sight and out of mind, let the money flood through from a few years of hyper networking and productivity and for all to drop into their laps.......till the end of time.

[Young Turk]

1 hour ago, scottbeard said:

Investment returns Byron!

He thinks us proles would know an investment return if it knocked our cloth caps off!

[Young Turk]

4 minutes ago, winkie said:

I can't get over how many today expect or vision a time, think it is their right, their entitlement to get rich from as little effort as possible, or from only a few years hyper gain and pain, gather gamble and invest to sit back and enjoy, out of sight and out of mind, let the money flood through from a few years of hyper networking and productivity and for all to drop into their laps.......till the end of time.

I assume you mean the people who believe you "can't go wrong with bricks and mortar"

Do you think they are stupid? Or have they correctly predicted that enough other people are stupid?

[winkie]

4 minutes ago, Young Turk said:

The high cost of housing, in large part due to the high deposit required (in turn due a combination of factors: low IRs globally, UK specific issues - planning laws, BTL rules and regulations, tax laws) is the housing crisis, as you say.

Yes and those that have gained a deposit via free equity from just holding use it as a new deposit at an almost a free cost of debt........if lucky interest only....if luckier still, have a hard working tennant paying both their interest and their pension.

[MARTINX9]

11 hours ago, byron78 said:

How many of you proles have 800K pension pots?

Few people do - except for those in the public sector such as doctors, teachers, police officers, senior civil servants etc or in other defined benefit schemes which may have 'notional pots' worth that. But even that only equates to an annual pension of £40k a year (1/20th of £800k) - which after tax might pay for 4 months a year in a care home if you ever need it!

And if you die within a year of taking your pension - you still take the lifetime allowance hit even though you may have only seen one year of that pension not the 20 assumed!

The annual/lifetime allowance is quite underhand/sneaky as it taxes theoretical accrued pension pots not actual cash in the bank.

Imagine if the Chancellor proposed an annual tax on the assumed growth in everyone's house price each year even if it was only notional as they hadn't sold it - there would be outrage! And this is no different - except you can sell a primary home but can't cash in a pension anytime you wish.

Edited June 21, 2021 by MARTINX9

[Insane]

11 hours ago, byron78 said:

How many of you proles have 800K pension pots?

Reminds me of the late 90's when Brown Started to raise Stamp Duty. It had been 1% across the board regardless of price paid. 

Then the 3% rate came in for anyone buying above £250,000 and people were saying well that will never matter to me a house around here is about £100,000 ( this was in the south east) Edges of London. Now you would be lucky to get a 1 bed flat here for that price and those £100,000 houses are closer to £500,000 price rises and fiscal drag have ensured that many not affected became affected. If maximum amounts allowed are not raised with inflation many who were not affected will in time become affected. 

[slawek]

22 minutes ago, MARTINX9 said:

Few people do - except for those in the public sector such as doctors, teachers, police officers, senior civil servants etc or in other defined benefit schemes which may have 'notional pots' worth that. But even that only equates to an annual pension of £40k a year (1/20th of £800k) - which after tax might pay for 4 months a year in a care home if you ever need it!

And if you die within a year of taking your pension - you still take the lifetime allowance hit even though you may have only seen one year of that pension not the 20 assumed!

The annual/lifetime allowance is quite underhand/sneaky as it taxes theoretical accrued pension pots not actual cash in the bank.

Imagine if the Chancellor proposed an annual tax on the assumed growth in everyone's house price each year even if it was only notional as they hadn't sold it - there would be outrage! And this is no different - except you can sell a primary home but can't cash in a pension anytime you wish.

Not quite, the tax is only due at specific points in time e.g. you start your pension, move it abroad, reach 75y , so called benefit crystallisation events. It is true that the tax is based on assets value, not cash. 

What I don't like about it is the tax is based on the pot value, not on the cash contributed to the pot. They penalise people why invested wisely, tax inflation (allowance was frozen and reduced), it is difficult to plan how much to contribute.    

[Young Turk]

6 hours ago, captainb said:

Will they include the public sector in it?....

They are included.

A very large proportion of doctors reduced hours or took early retirement to avoid high tax bills when the lifetime allowance was reduced to £1m.

"A BMA poll of more than 6,000 GPs and hospital doctors in 2019 found that that 31% had reduced their hours due solely to pension tax charges - while 57% were considering early retirement for the same reason."

Surely it will be crazy if reduced to £800,000. When it was reduced to £1m, it was going to be linked to inflation. So if they reduce after promising it's inflation linked, what's to stop them reducing to £600,000 next? What next - taxing ISAs?

[Young Turk]

55 minutes ago, MARTINX9 said:

Few people do - except for those in the public sector such as doctors, teachers, police officers, senior civil servants etc or in other defined benefit schemes which may have 'notional pots' worth that. But even that only equates to an annual pension of £40k a year (1/20th of £800k) - which after tax might pay for 4 months a year in a care home if you ever need it!

I think it's still a lot who have, or will have, 800k.

A level annuity would be about 5%. An inflation linked annuity would be about 3% I would have thought a defined benefit pension would be inflation linked, in which case an £800k pot would be equivalent to less than £30k.

[jiltedjen]

Is this going to annoy the self employed who were previously getting away with little tax by living of dividends? instead finding their new tax wheeze of instead shovelling it all into pensions capped?

I mean just pay the dam tax you leaches 

[Clarky Cat]

36 minutes ago, Young Turk said:

They are included.

A very large proportion of doctors reduced hours or took early retirement to avoid high tax bills when the lifetime allowance was reduced to £1m.

"A BMA poll of more than 6,000 GPs and hospital doctors in 2019 found that that 31% had reduced their hours due solely to pension tax charges - while 57% were considering early retirement for the same reason."

Surely it will be crazy if reduced to £800,000. When it was reduced to £1m, it was going to be linked to inflation. So if they reduce after promising it's inflation linked, what's to stop them reducing to £600,000 next? What next - taxing ISAs?

The NHS scheme is probably only viable currently because of the higher earners paying in more (13.5-14.5% employee contributions for consultants/GPs compared to support staff paying 5.6-7.1%, for the same percentage career average salary pension). If you drop the lifetime allowance to £800k then many doctors will be hitting this mid-career and either choosing to withdraw from the scheme, work less or both.. Exactly what is needed with the huge covid-related backlog. The annual allowance was already stopping people working extra as they'd effectively be losing money by working more. 

[RupertT]

58 minutes ago, Young Turk said:

I think it's still a lot who have, or will have, 800k.

A level annuity would be about 5%. An inflation linked annuity would be about 3% I would have thought a defined benefit pension would be inflation linked, in which case an £800k pot would be equivalent to less than £30k.

For the purposes of the LTA, DB pensions are valued at 20x the pension, so an £800k pot = £40k pension.

[Young Turk]

3 minutes ago, RupertT said:

For the purposes of the LTA, DB pensions are valued at 20x the pension, so an £800k pot = £40k pension.

Thanks for the correction!