25% Tax free withdrawal from Pensions - does anyone know when this expires?

[adultkidsquestion]

Posting here for traffic. Labour may not renew the existing "policy?" that allows you to withdraw 25% from your pension tax free. Does anyone know when this expires? Have googled to no avail!

This is my #1 concern about the new Labour government. I had plans for that withdrawl but it is a few years away so is risky. if they do remove it I'd probably stop paying into my pension but would pay a lot more tax. Probably even lower my working hours to avoid a tax cliff edge.

AFAIK, the rule has not been changed. It may not be, although there's been talk about doing so.

The 25% tax free lump sum is in legislation not a policy so it wouldn't 'expire' - the Government would have to introduce and pass amending legislation, so there would be some notice before any changes were made (if there will be any change)

I don't know if this helps or if it will change...

https://www.independent.co.uk/news/uk/labour-rishi-sunak-bbc-radio-5-live-b2570536.html

We're in the same boat, not quite due to retire, so we are hedging our bets with getting quotes from our pensions, the thinking being we are then just able to finalise it quickly. .

The interview I saw with Nicky Clarke - Starmer said "we might choose not to renew it when it expires", which made me think there is an end date on this, if you see what I mean. I am 55 soon, so this is quite relevant!

That article is quite contradictory, isn't it? Or he's made a huge faux pas.

It really is. A huge thing to have made a mistake about, but hopefully it remains unchanged 🤞🏾.

I'm 18 months away from being able to access mine so really hope they don't change it or if they do, that it's further down the line. Don't forget though that there is a phased change to 57 coming in next few years and I thankfully just avoid the transition plans.

I found out about this yesterday. It changes on 6/4/28. I will be 58 by then, so not affected, and DH only beats the deadline by 6 months! Why on earth would they stop people taking THEIR OWN money for an extra 2 years?

@adultkidsquestion the logic is that because the pension age has gone up, that age should go up in line. They want to keep the gap to be about 10 years.

I'm just glad that I'm old enough to miss that change. I'm still going to have another 13 years to pay more money into the pension due to the change in ages so can't see me missing out too much

And I don't think politicians think of these funds as OUR money. I think they think it's theirs to play with.

It wouldn't surprise me if they started taxing that withdrawal too again hoping that they will give people a few notice as it affects our financial plans for the future

I retired 8 years ago and still have a pension fund of £300k untouched. I have two other work related pensions which I get monthly and use savings to top them up for larger purchases or holidays. The plan is to use up all my savings then begin to access this pension using drawdown as necessary - after taking 25% tax free.

I will be looking out for any hints that this tax bonus is being changed so that I can hopefully withdraw the 25% first.

I think that interview was a mistake on Starmer's part. I don't know what he was talking about, but it doesn't expire, so he won't be in a position to not renew it. Labour HQ also confirmed after that interview that they had no intention of changing it.

I think he was possibly talking about the rise in state pension that will take it up to a level of paying tax. The Tories said they'd make changes to ensure it wasn't taxed, and Labour said they wouldn't. Something else he said in the same answer made it sound like he was talking about this policy. Although that also doesn't "expire", although will occur at a specific point in time I suppose. Basically I think that answer in that interview was just a fuck up, and he was talking about something totally different to what he'd been asked.

We are over retirement age and have our pensions spread around due to different employments. We have not taken most of our pensions yet as we worked beyond retirement age. We are currently trying to take our tax free 25% now in case there are plans to remove it. The trouble is everyone is doing the same and things take forever.

Watching the news today. Daily mail is suggesting labour is looking at applying inheritance tax to defined contribution pots

Is the issue that the change would mean you can't take the 25% tax free at all or that you have to wait until you are 57 to do so?

The first option would be really rubbish, but the second option seems fair enough, unless you have retire earlier on ill health grounds but perhaps there's an exception for that anyway.

Why would you stop paying into your pension?

Poverty in retirement is not a good idea...

Pension pot is ok so I won't be in poverty. But I was looking to have a great retirement. If that money will be heavily taxed then I'd work less now and spend the money rather than save for retirement or to pass on to children but have the government take large chunks of it.

I'm a believer in paying fair tax. But any taxation over 40% I don't consider fair at all.

If the 25% tax free sum is removed and you'll be paying the same rate of tax now compared to when you are retired, there'll no benefit in a pension over an ISA. if you are paying 40% tax now and will be on 20% when retired, pension still wins. This ignores things like salary sacrifice and employers contributions.

But if I might be in the 60% effective income tax rate from 100-125k then pension contribution looks good as long as I could take it out again.

If I can't withdraw that 25% then it is stuck for years (from 57 to 67 or whatever older age the government comes up with). I'd work less and enjoy life more now.

Government tinkering with rules is a PITA.

Blimey, first I've heard of it. I'm due to take mine 02/28 🤯 so hopefully they won't pull it back as it will make HUGE difference.

This news upset me today, it could affect my retirement planning.

I am divorced and so am entitled to an estate £500,000 before inheritance tax is due. I bought my bungalow in 2010 for £400,000 and after spending quite a lot on modernising it ( including a new roof, boiler, kitchen refit and new flooring throughout) it is now worth £650,000. All improvements were paid for out of my savings ie already paid tax on it!

I was intending not to use a defined pension pot I have unless I ran out of other savings which is unlikely due to several medical conditions. I wanted to leave the pot for payment of inheritance tax as I knew it was not considered part of my estate so readily accessed by my children and not taxable.

If Labour change the tax situation, it will mean this pot is reduced considerably.

I am not rich, I live a fairly simple life although I appreciate that I have been cushioned from the cost of living increases due to my careful financial planning - all my savings have come from my earnings, not an inheritance, so I’ve already paid taxes on it.

This potential new tax, together with losing the 25% tax free element of the pot, is one of the changes proposed by Labour which put me off voting for them. In some ways, I regret working hard to save for my retirement, maybe I should just have enjoyed spending it when I was younger!

Understandable though. The grammer and independ school educated man of the people Sir Keir Starmer KCB, KC benefits from a tax unregistered pension scheme from his time at the DPP This means that the annual allowance, lifetime allowance and tax free commencment lump sum limits do not apply to him. It's a specifc piece of legislation - The Pensions Increase (Pension Scheme for Kier Starmer QC) regulations, 2013.

https://www.legislation.gov.uk/uksi/2013/2588/contents/made

Putting money into something that the rules might change on later is also not necessarily the best move Some might take the view that forgoing the tax relief and saving from taxed income instead gives them more certainty and control. Given how Labour systematically destroyed private sector DB schemes when they were last in power, and the meddling by all governments since, I have sympathy for that point of view!