Planned tax raid on private pensions by the government

[Oldbean1965]

I have read a few articles about how the government plans to raid private pensions in their budgets in order to raise money. Of course it could all be stirring by the media.
How could they get their hands on our private pension money? We'll pay tax on it when we start receiving it anyway, which galls me as it's our savings. Why should you pay tax on money you've already been taxed on throughout your working life and saved?
I hate this government already, but the previous government were a shit show too 😡

In a defined benefit the notional "value" is based on years of entitlements and final salaries. It's not always a "pot of money" growing in value. Many defined benefit schemes don't really have funds underpinning them, some are wholly/partly paid out of current taxation, and private "defined benefit" schemes may require the employer to pay in ever increasing amounts of money to keep enough funds in the "pot". An increase in wages over the last few working years increases the "notional value" and could trigger the "lifetime allowance" punitive tax rules you're probably thinking about.

Don't be ridiculous

RR could also increase the age upon which you can get your tax free lump sum. Currently 55, already going up to 57, she could raise it to 60.

She's already said she wants more people to work and fewer "economically inactive" people, so making people wait for longer until they can start taking the monies out of private pensions would mean some people would have to work longer and not give up work earlier.

A win win for her. More tax/nic revenue. More workers to help the skills shortages.

I thought the idea was to have a flat rate of tax relief on pension contributions e.g. 30%.

Seems like a really stupid move when we already have many many people with no pension. Why would you want to encourage people to save less and potentially be more reliant on the government in old age. Very odd. See also the absolute fuck up with the consultant doctors who basically refused to work when the lifetime and annual allowances were reduced, so they had to be raised again for the benefit of the NHS.

There’s no reason why occupational exemptions can’t be made. Most of the proposed changes would have zero effect on average earners. It’s high time pension contributions stopped being used as tax avoidance.

If they take away the higher rate tax relief does that not mean that when it comes to withdrawal, you will be double taxed? What would be the point of saving?

I hope they don't stop spouses inheriting pensions. This would massively disadvantage women in particular. Many of my mums generation (born in 1950's) were SAHM's for at least until all children started school, and often we'll into primary, as no such thing as after school clubs when I was young. My mum got a low paid part time job when I was 10 and my brother 13, and only ever worked part time due to health issues, so her private pension is tiny, maybe £300 per year. She is reliant on my Dads private pension as the higher earner.

But Gordon Brown raided private pensions when Labour last in, so this would be typical Labour move.

How do you work that one out?

Not everyone who gets 40% tax relief will get a large enough pension to pay 40% tax when drawing it out, these people gain the most.

1. Would be fair for me. Why should higher earners get more tax relief. This directly limits tax receipts too. If it was say 25% for all then more higher rate tax payers wouldn’t bother with it and would pay the tax which increases receipts.
2. I think this is fair too. Why should someone be able to get a tax free income just because someone has died ? Personally I think pots should be taxed on the recipient at whatever tax rate they pay when they access it.
3. I personally think they will leave this but it is possible that they might cap the amount of tax-free cash you can take from current levels of £268k. Very few people can take anywhere near that amount and even if they reduced it to say £175k, it would affect very few people.

Will wait and see what they do but agree it's madness to disincentivise saving for old age

Many "pensioners" will only be paying basic rate tax on their pensions as most won't have incomes over £50k in retirement.

However, during working lives, many will be paying higher rate tax and claiming 40/45% tax relief on their pension contributions.

So, basically, for higher earnings, they get 40/45% tax relief on contributions but only pay 20% tax on withdrawals/pensions.

Basic rate earners get 20% relief on contributions and pay 20% tax on withdrawals/pensions.

Doesn't really make sense that higher earners benefit more from current tax relief than lower earners.

I agree, but we also need a tax/pensions system to incentivise those who need pension provision the most, i.e. lower and middle earners. Higher earners don't need it so much as they're less likely to be dependant only on state pension in retirement and more likely to make provision for themselves anyway, even without the extra tax relief they get which lower earners don't!

I agree I think 1. Almost inevitable, 2 probably and 3 possible. I don't know if even RR would means test stayed pension stm because what about people who have made additional voluntary contributions? I do think by dropping NICS eventually income tax will rise for all and NICS will go so over time they can do away with state pension but I don't think this will be any time soon.

1. I agree - it's a hard one to justify
2. I think should be limited to spouses only on the basis that financial planning is typically based on couples and as as someone has said upthread, it could unfairly disadvantage partners that had taken time out to raise children
3. Im 50/50 - many people, myself included have planned on the 25% TFC to clear a mortgage

Why should doctors get pension pots so massive that we have to rejig the tax laws in order for them still to get such a massive amount of tax relief, and yet we also have to put up with junior doctors strikes at the other end of the career pathway.

Doctors should either agree to higher salaries and lower pension, or junior doctors should acknowledge the massive, massive financial benefits from a career in the NHS compared to other public sector workers, and suck up the ‘low” starting salary.

I made a considered decision when I voted and I'm still happy with the choice I made, thank you.

Absolutely.

Public sector / unions are likely ok with it

People outside that who start getting hit by tax rises may feel differently

Seems so. I can't believe how gullible people are but then I remind myself, this is the country that voted for Brexit.

I mean they would have to have a basic rule that if the tax relief going in is max 30% then then tax on anything coming out is max 30% otherwise there is an actual disincentive for high earners to save into a pension!

I’m quite enjoying that this government is coming for everyone. Good for them. I thought as a high income family they were just going to fuck us over but nope, they’re going to fuck us all over 🤣

It’s in quite a few papers, including the Telegraph behind a pay walk, but it’s speculation at this stage. We’ll have to wait until the autumn, but with the government telling us to prepare for tax rises and with a promise not to raise income tax or VAT, they have limited option. CGT and pensions are the focus apparently.

But this is just about higher rate tax payers and cutting off a way to avoid inheritance tax, so only affecting a minority of people? Unless I have missed something