The budget 2014

[VikkiMumsnet]

George Osborne is all set to deliver this year's budget on Wednesday 19th March.

Here's a useful link for what's expected to be covered. Headline issues are likely to include property tax and stamp duty, as well as an increase in the personal tax allowance (up to £10,000).

What do you want to see as part of the budget, and what are you dreading coming up? Share your thoughts below.

it would be a hell of a lot of people trying - with the state of pay levels v cost of living and interest rates, plus unemployment, student loans, the number of people whose homes have been repossessed, the cost of renting etc etc etc a serious portion of the population is going to have feck all for their retirement.

merciless as we are to the sick, disabled and otherwise vulnerable in society thus far people are quite defensive about oaps who've worked all their life. i think it would take more than dm smear campaign to completely destroy that defense and you'd be talking revolution. the rich would want to have very big electric fences around the south east before it came to that.

For a lot of people it is wise to put money in to pensions if they are employed. Even in a dc scheme between employer contributions and tax relief on the way in it can be very worthwhile.

Jane is Correct that you could technically access your fund subject to tax at 55% however I'm pretty sure that it was classed as an unauthorised payment so was not something which many even considered. Flexible drawdown was a very sensible option for those with a good income, but the average dc pot is not that big by any stretch. I font have time to search for figures right now but based on figures I've seen recently re average annuity sizes I think the average is under 50k.

alternatively they could just not build flood defenses anywhere outside London and let nature take it's course. they'd have to keep a few proles mind - i can't imagine them dealing with their own rubbish or laundry somehow. i guess they could fly them in from other parts of the world though, 'we always get our staff from the third world darling, they're so hard working and none of this worker's rights nonsense'

Tryingreallytrying when I said in general I meant for the individual trying to plan for their future. I didn't mean for society so please don't call me naive. I am anything but, I am one of the many youngish people priced out due to buy to let at least in part. I think the fact that I have said that I was concerned about the impact on house prices should indicate this and I think it was pretty clear that I was talking at an individual not societal level.

ha ha, they're calling it a [[http://www.bbc.co.uk/news/business-26666103 (buy a) Lamborghini Pension
now!]]

or buy a boat...

I think I'll get into the luxury end of the Zimmer business.

Ffs. The way the press simplify stuff like this to puerile arguments drives me nuts sometimes!

Yes for many professionals the change is a 45% charge if they take it all out rather than 45% if I have read the properly.

For an average worker on £20k a year with an average £50k pension pot they can rely if they want on their state pension ( which is £140 per person so about £14,560 for a couple) and take the 50% which would be taxed I believe at 20% on some of it and 40% on the rest - so even they will be paying a lot of tax to draw it out. I have not read that you can withdraw it tax free. If they then invest that £50k they pay tax on the interest. If instead they buy an annuity with the £50k that will buy them about £2000 a year and that will be taxed IF they earn more than the personal allowance.

I am still not 100% clear on these changes but it seems that capped and flexible draw down stay. From April 2015 you can draw all the pension out even if you have no other income and I suppose even if you are not eligible for a state pension.

For people with biggest pension pots like £500k that you yield them a pension at most of £25k a year which would be subject to tax when they received the annuity. If they took the cash 25% is tax free but the rest is going to be subject almost to a confiscatory rate of 45% tax on most of it. That is a lot to give to the state in order to get your own money back.

Honey's point above is a good one. If a pensioner is renting then they currently will often receive housing benefit (and pension credit if their income is low). If they own their own house outright by then the state will not then pay their rent for them as they won't have any.

The equation not so well off people need to consider is if they don't pay into a pension can they afford to live on the state pension anyway £140 a week (you need 35 years of NI 10 of which can be doing childcare for your children at home). If they don't even qualify for that will they be paid pension credit and housing benefit? In other words if you never work at all, pay no NI ever will the welfare state make you on retirement into the same position as someone who has slogged it our from age 16 to 67? It is the huge dilemma for civilised countries. How to make work pay and whether we really want to move to non contributory benefits only for those without much money or say everyone pays in and is then paid out to on retirement.

Jane not sure going forward but my mum has not worked since early twenties, single parent so no spouse contributions. She now-to my amusement -calls herself retired -and is as you described re pension credits and full hb.

As you say -damned tricky for a civilised society.

Been quite busy so haven't read as much as I would like of the updated information - have they confirmed that you will have to take the money out in one go? Ie that you would have to take the 50 in one year? I'd expect that you will be able to stagger it either directly or via transfer to an intermediate product. So the tax could well be lower

I did not check that yesterday. I did make a note of where the HMRC detailed papers are (there are 54 pages here which I have not read - www.gov.uk/government/uploads/system/uploads/attachment_data/file/293079/freedom_and_choice_in_pensions_web.pdf )

I would imagine you could stagger it.

My idea yesterday for a higher earner like I am with own business would be in the year someone turns 55 they could get their income down to zero and draw £42k out of which 75% would be taxed only at 20% or whatever the sums work out to be.

There is always the interesting issue of what mumsnetters regard as morally abhorrent tax avoidance (which seems to be anything a big company does) and what is fine to reduce tax in a family....

At the moment I think you can stagger what is called "flexible draw down" as far as I know. I expect you will be able to do so.

1. Someone on benefits will not benefit from this at all as presumably it just means they don't get any benefits in the year or years they draw the lump sum.

1. Someone on my sort of income/size of pension will just find it about half confiscated by the state due to the tax rates when drawing it out.

1. Someone who has just the state pension may well want the cash and if it is a smallish pot it may just be subject to 20% tax or even no tax if their income is £7k a year.

I am not a pension expert though. People need to take their own advice. I am hoping to take as much as I can of mine when I turn 55 as I am not a fan of pensions these days so I might take 25% tax free and then a simple annuity for life which will be taxed at 40 or 45% on the sum received. Or I could leave it all as I won't ever need it as I don't plan to sell my business ever but then I don't get my hands on the money and if I die it is subject to 55% tax charge anyway if you haven't drawn it plus 40% IHT if it's in payment. At every turn you are taxed and taxed on all these things.

I know. Only thing to consider is that you will get a relatively low annuity rate at 55- if you don't need the income immediately you might be better to wait a bit. Not a retirement planning expert though - I work in the industry but not from that perspective

i don't think it does mean that someone who never worked and someone who slogged for 50 years end up the same. the slogger will have their own home, full state pension and whatever pension they paid into in those 50 years. they will have options like releasing equity or renting out their home whilst they travel or go to live overseas, they will have the ability to leave an inheritance to their children etc.

the theoretical never worked person will likely be in a council flat (bedroom tax isn't going anywhere) living on pension credit with zero capital, zero options, zero credit facility and zero chance of going on holiday let alone going to live overseas or leaving money to their children.

it's a falsity to say it doesn't pay to work, they've got everything we've got and they've never worked a day in their lives.

having your own home, choices, a car, the ability to go on holiday or travel, leave money to your children, treat the grandkids, go out for meals and take up leisure pursuits etc really IS something and is worth working for surely?

would we really see that as on a par with a pensioner with nothing to their name but woohoo they've got a roof over their heads and so long as winter doesn't get too cold or last too long they'll hopefully not freeze to death?

my parents for example were never high earners but took a risk on a business later in life and managed to sell and retire just before 60. they spend a month a year in spain, they have a newish car, they have a nice home with a big garden and if they fancy going out for the day they do. they don't have rent or a mortgage to pay and they now also have their state pension coming in. they juggle around various bits of income and my dad pores over where best to move it to next and which is best to take for living and which to put into products etc.

they are by no means wealthy but there is no way you can compare their situation to the old lady who used to live next door to me living on pension and HB, never having owned a car, having no spare cash and wearing the same clothes for the last 20 years and as it turned out managing for years without a fridge after hers gave up because she couldn't afford a new one.

basically you work and save to have a quality of life at the end - that's the deal. those who don't manage it still are allowed to survive but they don't have that quality.

the point of that investment is not live or die (re: leave those who don't to die in the street) but survive or ENJOY continuing choices and freedoms.

Doesn't always work like that though. You can work all your life at £13k a year renting. That person may be no better off than someone who has chosen never to work. Although I am not suggesting that everyone who works for the minimum wage for life regrets it.

SC, yes for most people but I will work until I die (and have other savings and if really pushed could sell the house) so I just want the pension cash now with paying as little tax as possible.

What I'm not sure about is if you take the annuity now you can also take 25% of the cash in the pension totally tax free and can do that from age 55. The annuity would be bought with the 75% left in my pension pot. It would be about £5000 per £100,000 (for life, no inflation proofing, no spousal benefit). That gets the highest immediate return. Then about half or just under of those annual annuity payments would be taken back in tax as I pay higher rate tax and presumably always will.

So I suppose a sum might be if it were £400k in the pot: £100k no tax oni t and buy annuity of £15k a year for life receiving about £7k of that after tax say I live 30 years = £210k net plus £100k = £310k.
Against taking it all as one lump sum subject to 45% tax = £220,000 and then invest the £220k at say 2% if I'm lucky which will be subject to tax so basically no interest on that. The annuity appears better BUT in 20 years time £15k a year will buy a Mars bar due to inflation so may be taking all the cash out is the better option at age 55.

One question i have if you take all the cash out is it taxed at your highest rate - 45% or do you still get the 25% part free of all tax?

if you lived your whole life on minimum wage you'd have been receiving benefits all the way along anyway re: working tax credit, possibly HB top up etc. and to never get above minimum wage in a lifetime of proper employment seems unlikely don't you think? to never have a promotion? to never work your way up a bit?

can't think there's many in that situation.

THB - I work with many people like that in retail.... I started in Sept and see it as a nice little job that fits in with family needs etc whilst earning a bit to pay for holidays and the kids piano lessons etc....

some of the people I work with have been there since age 17 - some since the shop opened 19 years ago..., have no progression path - a shop wants a good shop floor worker to stay a shop floor worker.....

people do live on NMW all their lives and are proud of the work they do.. it has been a bit of an eye opener for me from my MC-mummy-wanting-a-little-job background

the people planning to work until they die have obviously never met an old person who has become frail or disabled, or for example has lost the use of an arm or the power of speech after a stroke, or lost a limb in an accident.

Or even met a young person to whom such things have happened.

I grew up with people who are now doing care work and shop work at near minimum wage. A lot of the time people are moving from job to job, not through any problem with them, but the businesses cut back or go bust. My Mum also has an former close neighbour/friend where it's a running rueful joke that she never qualifies for redundancy pay either!

I think "working until you die" is fine if it's because it's something you love doing and you have a back up plan (like jane)

Not a good option if you are relying on it to survive financially!

My father (doctor) worked until he was 77 full time. He did have dementia after that and died at 79 (two years of his pensions... not such a great investment there) so I do know it can be like that but if you are working from age 55 - 75 you have a lot of years to build up capital whether in or outside a pension after the children cease to be expensive and after you've paid your mortgage off (for some).

It is now illegal to make most people give up work at 65 or 67 whatever state pension age is or is going to be. However I agree that if you are laid off at 67 it will be hard to get another job and it is wise to have some form of savings unless you want to live only on the £7280 a year state pension (x 2 if you are in a couple).

I do so many different types and kinds of work and have quite a few children who would support me if things got tough financially and I could sell the house that I know I willbe fine and I want as much out of the pension as I can when I turn 55. That might still have to be 25% tax free and the rest an annuity with the income taxed at source at my very highest rate or all of it out and taxed at 45% and I keep 55%. I will need to do the sums nearer the time AND we don't know yet if the Tories will get in next time. Labour has not committed to the changes proposed for April 2015 only to the intermediate tinkering with the financial limits (eg the reduction from £20k a year income needed before you have have the existing flexible draw down going to £12k a year income - Labour agree that but not the April 2015 changes).

Another potential options which might be a bit more flexible Jane - you could take your 25% and then put the rest in to a (crystallised) SIPP. Would mean you would still have flexibility over the income, and it wouldn't stop you then buying an annuity with it further down the line if things changed.

Not advice - just one of the many options which you might not have considered :)

Can you take the 25% though without buying the annuity? If so that is good news although i suspect I will be a higher rate tax payer until I die so never will be an easy time to take it out without paying tax on it. (It is all already in my SIPP which I manage)

At the moment, you can take 25% tax free and go to income drawdown, selecting payments of your choice within the limit. You can choose a payment of 0% if you wish. You can change the payments later if you wish. If you have a SIPP I am sure your provider does it for their clients all the time.

It's been a while since I've done SIPP stuff (worked on product development a few years back), but I believe so. IIRC, you "crystallise" the SIPP which basically puts it in to the retirement phase. That triggers your entitlement to tax free cash. You take your 25%, and the rest goes in to the drawdown pot instead of annuity purchase. Unless they've changed the rules, crystallising your SIPP doesn't prevent you from buying an annuity later and it's still invested so it could sit there growing for a while.

You'd need to investigate the IHT consequences - I think that if there was cash in the SIPP when you died then it could be paid out as a lump sum subject to 55% tax but I am not certain. However if you are considering taking it all out and then investing it (under the new rules) then it would be getting double-taxed I think; income tax at your marginal rate when it comes out of the pension, then IHT on whatever is left on your death.

Minefield, and a bit morbid for a Sunday morning, sorry!