Is anyone else making a pension contribution before the budget?

[MotherOfDragonflies]

Am I worrying over nothing? I’m self employed and generally wait until the end of the tax year to put money into my pension since I can then see what I can afford to put in but reading about labours planned pension raid and the chances that they will remove the 25 percent tax free sum for new contributions and also reduce tax relief on contributions has me worried. My pension isn’t amazing and I’d been planning on increasing contributions.

is it worth putting in a lump sum or could I be tying up money for no real tax advantage

Weird that you blame her more than the actual prime minister, or the chancellor.

@DancingPhantomsOnTheTerrace not really. She is the bloody worst vocally. When she shrieks “I represent women I business” I bloody cringe. Because she doesn’t. She isn’t representative of me (from an absolutely working class background who has inherited or been given nothing) She has never done it and she does not know. But she stands on the world stage and claims she represents me? Just awful….

Ah right, so I should buy the car now so that I only pay tax once. Instead of saving for the future and paying tax twice.

Got it.

Agree completely with your first paragraph.

Re second - might be great for individual, will be disaster for economy. Tesco shelf stocker can't afford to go part time, it's high earners=high tax contributors who will be incentivised to work part time means total tax take will reduce as well as overall productivity and total amount of money spent on goods and services. This is on the top of 9m of economically inactive people of working age

Well yes, I find her quite irritating as well. But in the context of a budget, "before that deluded ginger idiot gets to decide what happens with MY money" does seem to put a disproportionate amount of blame on her, rather than Starmer or Reeves.

You do realise that certain newspapers opposed to Labour actually release these stories as a strategy. It's propaganda and they do it because the Tory agenda suits them better.

Why are people so naive?

it makes more sense to help lower earners as it helps more people.

Damaging the UK's economy by disincentivising work - so we all have a lower standard of living - and creating longer waiting times for doctors and dentists doesn't actually help more people.

why do people feel it's virtuous to work full time when you could have shorter days/a day off every week or two

That's a good question. I had thought that I could use this last decade of working to really build up my pension. I want to make sure I can support myself not only now but in the future. That includes choices in medical care and elder care, which I don't believe are adequate in the UK now and certainly won't be by the time I need them, the way the economy is going. I'd also like to help my DD get on the housing ladder, and be able to support her whatever happens in her life.

But as a pp said, maybe I'm reaching for the wrong goal. We have a short time in this life and just now I still have my health (starting to feel my age!) and my DD still lives at home.

I do have decades of experience in a shortage skill area: corporate growth is routinely limited due to lack of people with my skills. But that's not my problem.

Society benefits if I work full time. But actually I benefit if I work less. It's food for thought.

That just about sums it up. And shows the economic illiteracy of the government as at the same time they have said they want to make the UK a high growth economy. Although, Reeves is an economist. And as is well known, economists have forecast 6 of the last 2 recessions…

Just placemarking so I get reminders of this thread. It is a topic of live interest for DH and I. But on balance, I agree with the pension advisers about the difficulty of changing the rules overnight. April 2025 or 2026 are more likely.

I'll be going part time if they reduce the tax relief applied to contributions. That's not a "threat" as some people believe higher earners are bluffing... it's fact. I'm at the cliff edge so it genuinely makes no financial sense to contirbute without the relief. I am liable for 62% tax on my income plus i lose tax free childcare (£2k/yr) and the 30hrs childcare funded hours.

If I reduce my hours then suddenly I'm back to just paying 40% tax and I'll benefit from childcare help too. No brainer at all.

Of course, bad overall for the economy at a population level as lower tax going into the public purse (the earnings from that extra pay would have been put into pension and taxed at withdrawal remember), less productivity for UK (if we all cut hours the productivity of the country would reduce) and less economically active elderly generations as they will not have prioritised pension saving due to no incentives to do so.

With the way the state pension is going it's highly unlikely I'll get it when it's my time to retire (I'm 35). So surely the government need folks my age to prioritise private pension savings instead?

Same here - will need to see what it looks like but if we go over £100k then will be losing £700+ a month. Going part time would make sense for us unless we can sal sac in other ways.

If you can, I'd definitely contribute more before the budget. Nobody knows for sure but good chance they'll raid pensions contributions for income tax.

I'm very concerned to hear about the possible removal of the 25% tax-free lump sum as that's my plan in 3 years' time to pay off my mortgage :(

If they decide to do this, when would it be?

This is interesting
I was certain that changes to pension relief will lead to substantial part-timing and retirements amongst high earners in 50+ bracket, those on 100+ , especially parents who have kids in private schools and can't afford this anymore due to VAT.

It's 4% of workforce in the UK who are on six digits and they pay about 30% of all taxes. If only 10% of this cohort reduce their earnings the impact on tax take will be horrendous.

Before everyone jumps in about someone else taking these jobs - this just won't happen, not en masse, due to skills shortage

We're hoping to pay a chunk in from the business (as long as we have been paid for our work, of course) but the tax refund will be taken off the corporation tax bill.

I think they might cap the amount you can take tax free, so no more than 75k for example

The amount is already capped at £268k, but I do think that it’ll be a target for reduction. The problem is a not insignificant number of people will have planned on using part or all of their tax free lump sum to clear their mortgage. Indeed some research (pre Covid) showed that over 300,000 people had this factored into their retirement planning. I don’t expect that the government will be too bothered about the impact on them however, unless they are union members ;)

I'll need £50k
Might need to start saving harder :(

Not read the thread but changing tax relief in the middle of the tax year will be a tax return nightmare.
Could change the tax free lump son sooner though so depends if your money needs to go in out. My DH's friend got his 25% out the other day and he works in investment banks.

Mines taking his next week.

Can't do it till I'm 55 :(
(Unless I've missed something?)

Yep think the ones who can't take it out just yet will have to wait and see what they do. We're still on the paying in stage, due a wages boost in November so hopefully will be able to make a payment in before they can implement any changes they announce.

I totally agree with your thoughts. It's daft but I'm also in the final decade of working and my primary aim of working now is to build up my pension so I can better support myself. I do enjoy work, but maybe I need to slow down. The tax hit will make me question what I'm doing. I think a lot of people in their fifties will feel the same.

We have already retired and took the 25% some years ago. But DH and I and our friends are wary of new tax implications with this government. So friends with a commercial property that they were on the cusp of marketing to sell are now keeping it, rather than be hit with a raised tax bill after the budget. I would suspect developers will be hit with higher tax bills and raised section 106 obligations so will sit on land/developments rather than run the risk of their profit going in tax too.

I remember when people used to always fill up their cars the day before a budget, because of predicted fuel tax increases, and it feels a lot like that caution Iain the air this time. If I had any spare cash I would make sure my ISAs were maxed out. Although obviously these may be raised in some shape or form at some time too.

I think that the cap for the tax free lump sum is likely to be reduced. Maybe to around £40k which is just over the average outstanding mortgage in the UK at retirement (source: Rupert Jones in The Guardian Sept 2023). I think that scrapping it entirely would be pretty awful. I’m not a massive fan of pension reform and I say this as someone who won’t really be impacted (I’m already part time and Basic Rate). It’s a short-term win for the gov.