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 😡

This particular thread is discussing private pension pots but so many stories in the press are going to affect all tiers of income. It’s glorious. Turkeys voting for Christmas.

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.

No, she'll be thinking about growth above the annual allowance which is taxed at your nominal rate and needs to be paid yearly if incurred.

I got a £10k pay rise last year (yeah!) which meant I took home an extra £3.5k, but then got landed with a £14k tax bill.

So basically worked about 2 months for free, all for a notional increase!

Nope - given the state pension is virtually the same as the personal allowance, a reduction / abolition of the 25% TFC will impact everyone with a pension pot or in a defined benefit scheme

I am not in UK. Is the 40% tax relief on pensions unlimited or is there a cap on the amount on which relief can be claimed?

I'm following just out of interest, and wondered how they could means test the State Pension if it is based on NI contributions? Surely the same would apply to the NHS then, if you fail the means test you pay for your health care. Can you imagine!

I agree with capping pension relief, or having a standard rate relief only.

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.

Because the tax laws were never designed for defined benefit schemes, they were designed to stop people avoiding tax by putting huge amounts in defined contribution schemes.

With a DCS you can avoid annual allowance tax by just not paying so much into your pot, it's your choice. With a DBS scheme you must pay exactly what you're told to pay as a % of your salary. Mine is currently 12.5% so it's not cheap. The only way I can manipulate what I pay in to try and avoid an annual allowance charge, is by choosing to either leave the scheme, or to do less hours.

Not really ideal to have senior doctors working less when the government are so concerned by the ever-growing waiting lists, is it?

I am not in UK. Is the 40% tax relief on pensions unlimited or is there a cap on the amount on which relief can be claimed?

There is an annual allowance of between £10k and £60k. Any pension pot growth above your annual allowance is taxed at your highest tax rate. This is very simple for DCS, but virtually impossible to calculate in advance for DBS, so you get random enormous tax bills.

They're coming for your money any which way they think they can get away with it. They're the Labour Party, that's what they do.

There as the last Tory government left a complete mess after giving all their chums our money.

Fine by me. They’ll spend it on stuff that benefits us all.

The last Labour Govt raided your pension too - unfortunately most people didn't notice ( they removed the tax relief on the dividends within pension funds). This made a huge difference to the amount that people get from them and is one of the reasons we went from having gold standard pension provisions to the low levels we have now.

I'm not a bit surprised that they plan to do it again. However I doubt very much that MPs pensions will be affected.

You mean a two tier system, worse than now even, between the state and private sectors. Unsustainable, unfair, and will bankrupt the country. UK Plc is effectively unable to cover state pension provisions already.

Stalin had nothing on this! 😮

The thing that is easiest to do is to include pensions in inheritance tax, I think you can only pass on DC pensions to your children, if you wanted to pass on a DB pension to adult children you would have transferred it out, a few years ago there were quite good deals for transferring out.

I agree. It's a VERY slippery slope to have different tax rules for different occupations. Grossly unfair.

If people have a very high pension pot, ALL people with similar values of pension pots should be taxed the same.

The problem with doctors was that the LAW regarding the punitive tax charge on high pension pot values was flawed.

Why should doctors get pension pots so massive that we have to rejig the tax laws in order for them

Because we need them and there’s a shortage of them. It’s known as supply and demand.

A lot of not so well off people use the lump sum to pay off the mortgage or other debts, not everyone can afford to go on a cruise with it.

I can understand the temptation to raid some high value private pensions. I know someone that started their own construction business and just by luck bought an industrial property in an area that was then subject to massive development 40 years later. They sold their very small property plot (which was owned by their SIPP) to a developer for over £10m.

That property "profit" was never subject to any tax, so there is about £15m sitting in that pension fund that has never had any tax paid on it. In fact, the fact that the company paid rent TO the SIPP for years also then reduced the company's tax liability over the years too.

Yes, they'll start drawing it down and paying tax on their pension when they retire, but that kind of pension pot is like a free cashflow boost to the government if they can find a way to get their hands on some of it.

Then increase the pay of junior doctors so that they are more likely to stay in the UK and the profession.

Could probably save a bit of money by removing DB schemes entirely for new entrants to the public sector and just offering a DC scheme (it’s an option in the civil service anyway). In quite a few jobs there isn’t really a pay differential between public and private sector now, anyway.

Surely high tax payers would be inclined to limit their pension contributions and for example pay down their mortgage / look at other investment portfolios that aren’t pensions? Would that benefit the government?

Yes, they'll start drawing it down and paying tax on their pension when they retire, but that kind of pension pot is like a free cashflow boost to the government if they can find a way to get their hands on some of it.

That could be done quite easily by reintroducing the lifetime allowance but not allowing transitional protection.

What would they do that? They’re still losing the tax relief.

Let's remember that those paying "higher rate" tax are those earning just over £50k. This is hardly megabucks because the tax bands haven't increased for years and changes to the exemption for this group will affect a lot of those on middle incomes. The last thing we need as a country is to disincentivise saving for retirement.

Me neither. I know who's done the most damage to this country over the last 30 years and it ain't Labour.

IMO

Whatever they do, it can't be as big a steal as that bastard Lawson got away with when he cut back pension scheme surpluses just before the market crashed.