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 exactly why people don't trust pensions - you tie up your money for decades and then the rules about accessing your own money keep changing.

All the work being done to encourage people to save more, the planned extension of the workplace pension requirements etc are completely undermined by threats to defer access, remove the tax-free lump sum or impose inheritance tax.

I'm in a similar situation. I wasn't planning on taking my pensions yet but am now putting plans in place to take them early.

WTF?

There are a number of very specific jobs which due to the way the job relates to UK legislation require specific individual legislation for their pensions. In his case it was his role as DPP. It's not something special, it's something that anyone in that job at that time would have had to have done for them.

Be grateful that Liz Truss didn't outlast the lettuce. Her favoured position on state pension and retirement was to raise the age to 80. Only marginally below the average male lifespan - so very much a work-until-you-drop policy for most of the population.

He's not in that role anymore.
It's nice to be able to be protected from the tax hikes he has in mind for the rest of is.

Is it lonely in Tufton St these days?

Is that all you can counter my post with?

If any gov brings this in (changes to pensions, plus vat on schools, then at least there would be a level playing field as 2nd home owners have already been punitively taxed for more stamp duties, tax on rental income and CGT when they sell.

they then have to go on to sort IHT and impose a one off windfall tax on big corporations etc and Uk might have a chance at being an equal society.

the referendum on the monarchy can follow too and impose some clawback tax on them too.

happy days!!

The consequences will be people will either pay the tax or not have a new car as they retire.
Or a new kitchen. Or a new anything that people spend the money on.

But remember folks to save for your old age.

I'm planning on taking my 25% in 18 months but will continue to pay into my pension until I retire, which will be another 14 years or so. I'm going to spend a bit of it but invest the rest of it in a different way.

Exactly.

For years Governments have been told a stable platform is needed if people are expected to trust the system enough to tie up money for decades.

Any changes to the factors you mention or income tax relief on contributions would hugely undermine the system and many would abandon saving into it. It would be the Government shooting itself in the foot.

Not to mention breaking a manifesto pledge to remove the 25% tax free withdrawal or reduce the income tax relief on contribution because these would both be an increase in income tax which it specifically pledged not to do.

I doubt labour will stop people withdrawing 25% of their pension tax free, as it would make pensions substantially less attractive to the lower paid,

I think it’s more likely they will reintroduce the lifetime limit on tax relief, and bring pensions into a person’s estate for the purposes of inheritance tax. Both courses of action seem eminently fair to me. Pension pots are currently a way for very wealthy people to leave millions of pounds (of untaxed money) completely tax free.

It also seems ridiculous that someone who inherits a pension (from someone who dies before they were 75) is treated so much more generously than someone who is using their pension as a pension! Pensioners are paying tax on 75% of their withdrawals, whilst beneficiaries can withdraw the whole pension without paying income tax. so I hope this loophole will be closed too.

https://www.bbc.com/news/uk-politics-65037136.amp

If Labour decide to do that then I would like to see Starmer and all the other mandarins taxed as well.

Good summary on what is currently known about Labour's plans for pensions

https://www.fidelity.co.uk/markets-insights/personal-finance/saving-for-retirement/labours-possible-pensions-changes-what-chance-they-happen/

The idea of that money being tax free is that often in such situations, if someone has died young, the pension is being left to support dependent children. This protection is particularly important for lone parents, whose pension savings provide an immediate source of financial support for their orphaned children should the parent die (as they are considered outside the estate) and the withdrawals being tax free is a decent concession to make just like a life insurance payment would be subjected to income tax as the children required it to fund their ongoing costs with their deceased parent no longer around to do so (and the children having to be raised by their appointed guardians to adulthood without their parent being able to earn any further money for the rest of their childhood, given the parent is now dead, so having less overall income available to support them over that period). It seems perfectly reasonable to me. Perhaps the relief could be qualified so that it is only tax free if the beneficiaries are under 25, or maybe the age of the person leaving the money lowered to 65. But to withdraw it entirely seems callous if you think about the circumstances in which it would usually apply.

These attempts to constantly look for ways to rip holes through the plans that people have put in place in order to protect their loved ones, and indeed to provide for themselves in retirement which the state if it had any sense would be wanting to encourage, are really quite unpleasant and counterproductive.

Pensions are a decades-long investment and therefore require a great deal of trust in the system. That means there must be stability and predictability, because tying up your money for so long is already taking a great financial risk without political risks being added. There is robust research on this topic which makes it very clear that if the Government wants pension saving to work the very best thing it could do is leave the legal framework alone and simply uprate all allowances etc with inflation annually.

Reintroducing the LTA will directly impact doctors, who are one of the biggest beneficiaries of the changes by the last government. So Labour can’t take that away without causing more problems. They could of course give doctors an exemption, but that sends a shocking message and would cause uproar amongst taxpayers. Why should state employees be able to shelter more cash from the taxman than those who work in the private sector? Although do course Sir Kier already benefits from an exemption specially for his own pension so don’t rule anything out!

Out of curiosity, why does he get an exemption? Seems like an incredible socialist cliche "Do as I say not as I do". I thought Socialism was about everyone being equal?

@Nepmarthiturn. There are already different rules for under 18’s, and under 25’s who inherit.

@Tryingtokeepgoing. The exemption to the lifetime limit on tax relief was originally talked about as being only for senior doctors, and I don’t think anyone batted an eyelid.

I think people would accept a higher cap for doctors for pragmatic reasons. I can’t think of any other professional that is as vital, and takes as many years to train, as a senior doctor. It would need to be monitored to avoid perverse effects though.

I do think there has to be limits on how much tax relief people can receive though, especially when people start using pensions as tax avoiding vehicles rather than their intended purpose.

Wealthy individuals often seem completely oblivious to the benefits they receive from the government.

Plenty of people batted an eyelid in my peer group about a privileged and well paid group of people being given better tax breaks than other taxpayers!! And then what about higher paid head teachers, for whom the LTA will also bite. Then senior civil servants? It’s unworkable to give state employees better tax breaks than those funding them.

I like the idea of setting tax relief on pensions to 33% for everyone though, instead of a discriminatory LTA based on whether you’re a state employee or not.

@@Tryingtokeepgoing. You’re probably right, people would see it as discriminatory, in which case a slightly higher cap for all would be fairer.

I’d be very much in favour of a standard rate of tax relief for everyone, and that would presumably somewhat reduce the huge pension pots anyway.

My DH can get his pension in September when he's 60. He's already sent the form back and hoping Reeves won't bring it in before then. I've heard she will be doing a spending review in November. I suppose she might do something then but maybe she won't. Who knows? 🤷

But the Tory shills on here like to make out none of their lot ever make a bloody fortune shorting against economic disaster for everyone else[ Autumn 2022 anyone?] 🙄

He doesn't. His former job does.

But do carry on wittering about socialism in an ignorant way...