Interesting budget yesterday, quite a lot of less spoken about bits some on here may be effected by;
Dividend allowance moving from £2k to £1k (2023) and the following year down to £500
Capital gains allowance more than halving to £6k (2023)
Particularly damaging for small businesses and entrepreneurship.
My wife is on the phone as I type this to her accountant. It sounds like consideration may be given to coming off dividends and going back to PAYE as the divi scheme seems to have run its course. Also, more PAYE will reduce the profit so resulting in less Corporation tax to pay.
Will it offset the big jump in NI contributions though?
Problem with the CGT rates being reduced is that if Labour get in after the next GE (which atm seems highly likely) then I doubt they will rush to put them back up again. Look at the Pension Lifetime Allowance - George Osborne started cutting it & it has now only just started to increase over the last year or so, although I haven't seen anything to say they will stop the CPI increase next April (at 10.1% I wouldn't be surprised if they did cap it).
But a £3k allowance from 2024 for CGT is just ridiculous imo. Just doesn't touch the sides as any meaningful "allowance".
Problem with the CGT rates being reduced is that if Labour get in after the next GE (which atm seems highly likely) then I doubt they will rush to put them back up again. Look at the Pension Lifetime Allowance - George Osborne started cutting it & it has now only just started to increase over the last year or so, although I haven't seen anything to say they will stop the CPI increase next April (at 10.1% I wouldn't be surprised if they did cap it).
But a £3k allowance from 2024 for CGT is just ridiculous imo. Just doesn't touch the sides as any meaningful "allowance".
The Lifetime Allowance has been frozen until 2025/6. About the time inflation should be back under control! This will bring a lot of people into this sneeky tax, just as a result of normal pension saving. £1,073,000 sounds a lot but really isn't for a pension pot. Somebody at 30 on £40k and with the recomended 15% going into their pension pot and with decent returns could easily exceed a frozen LA by the time they reach state pension age.
I know that your LTA IS £1,073,000 at the point of retirement. However, after retiring, if your investments fare well and you go over this figure in your pot post retirement, what happens? Is your balance over the LTA tax at the end of the year at 20%.
I know that your LTA IS £1,073,000 at the point of retirement. However, after retiring, if your investments fare well and you go over this figure in your pot post retirement, what happens? Is your balance over the LTA tax at the end of the year at 20%.
The Lifetime Allowance (LTA) is assessed when you take any money out of your pension. Even the 25% tax free allowance. This is known as a Benefit Crystallisation Event (BCE). At that time a calculation is made to see what that "withdrawal" equates to in relation to the then LTA. If that takes you over the LTA then you pay an excess tax charge - either 55% (if the withdrawal is a lump sum) or 25% if the withdrawal is taken as income.
Scenario 1.
Pension "pot" of £1.2m. You take 25% out tax free. The £300k is assessed against the LA (£1,073,000) and its recorded that you have used up 27.96% of your LTA. The remaining £900k can stay in your pension & continue to grow and when you come to take any further monies then that withdrawal is assessed against the LTA.
Scenario 2.
You have a final salary DB scheme. You retire with a pension of £60k pa. This equates to a pension "pot" of £1.2m (on retirement pensions taken from a DB scheme is calculated at 20x the annual pension). You are over the LTA by £127,000. As you are taking an income the excess tax charge is calculated as 25% of £127k and therefore you incur a tax charge of £31,750. Usually you can have the tax taken off your annual pension so in this case your £60k annual pension would be reduced (I think there is a factor for calculating this but that's above my pay grade) but usually I believe it would reduce the pension by a couple of thousand.
I have a number of clients that have exceeded the LTA ( via a DB scheme) & even have personal pensions that they have not touched as any money coming out would trigger an excess tax charge.....even the 25% "tax free" element.
If anyone is close to having £1m in their pension pot I strongly advise that they speak to an IFA or an Accountant as you may want to start planning what to do BEFORE you come to retire.
The LTA is annoying, especially the lack of increase over time, however I've come to the conclusion I'll exceed it, and so what. At the moment I'm managing to get 62% tax relief on a decent proportion of my pension contributions, so 38p in the £1 my contribution costs, so still likely better than not putting it in.
Problem with the CGT rates being reduced is that if Labour get in after the next GE (which atm seems highly likely) then I doubt they will rush to put them back up again. Look at the Pension Lifetime Allowance - George Osborne started cutting it & it has now only just started to increase over the last year or so, although I haven't seen anything to say they will stop the CPI increase next April (at 10.1% I wouldn't be surprised if they did cap it).
ut a £3k allowance from 2024 for CGT is just ridiculous imo. Just doesn't touch the sides as any meaningful "allowance".
The Lifetime Allowance has been frozen until 2025/6. About the time inflation should be back under control! This will bring a lot of people into this sneeky tax, just as a result of normal pension saving. £1,073,000 sounds a lot but really isn't for a pension pot. Somebody at 30 on £40k and with the recomended 15% going into their pension pot and with decent returns could easily exceed a frozen LA by the time they reach state pension age.
Most people would assume that anyone with a million pounds of savings wasn't getting any tax relief so they could save even more - even if it is a "pension".
I don't think there's much chance of any uproar from the general public about this. Does seem a bit sneaky though to apply a special tax after you've already saved the money!
Would be better to make pensions more like ISAs. Anyone can benefit by putting up to £1,000,000 (say) into your pension over a lifetime. But after that you're big and strong enough to look after yourself without government support!
Sorry - not meaning to be too political - it's Sunday morning!
Problem with the CGT rates being reduced is that if Labour get in after the next GE (which atm seems highly likely) then I doubt they will rush to put them back up again. Look at the Pension Lifetime Allowance - George Osborne started cutting it & it has now only just started to increase over the last year or so, although I haven't seen anything to say they will stop the CPI increase next April (at 10.1% I wouldn't be surprised if they did cap it).
ut a £3k allowance from 2024 for CGT is just ridiculous imo. Just doesn't touch the sides as any meaningful "allowance".
The Lifetime Allowance has been frozen until 2025/6. About the time inflation should be back under control! This will bring a lot of people into this sneeky tax, just as a result of normal pension saving. £1,073,000 sounds a lot but really isn't for a pension pot. Somebody at 30 on £40k and with the recomended 15% going into their pension pot and with decent returns could easily exceed a frozen LA by the time they reach state pension age.
Most people would assume that anyone with a million pounds of savings wasn't getting any tax relief so they could save even more - even if it is a "pension".
I don't think there's much chance of any uproar from the general public about this. Does seem a bit sneaky though to apply a special tax after you've already saved the money!
Would be better to make pensions more like ISAs. Anyone can benefit by putting up to £1,000,000 (say) into your pension over a lifetime. But after that you're big and strong enough to look after yourself without government support!
Sorry - not meaning to be too political - it's Sunday morning!
I agree - £1 million is a high enough limit for full tax relief and is beyond the dreams of the vast majority of the population. Once reached then other forms of investment can be used, funded from net income, and being outside of a pension means it does not attract income tax when realised - apart from certain investments such as property and other physical assets (e.g. art) that would attract CGT. Even if it's just SS or cash ISAs where £40k a year can be invested as a couple.
I know that your LTA IS £1,073,000 at the point of retirement. However, after retiring, if your investments fare well and you go over this figure in your pot post retirement, what happens? Is your balance over the LTA tax at the end of the year at 20%.
The Lifetime Allowance (LTA) is assessed when you take any money out of your pension. Even the 25% tax free allowance. This is known as a Benefit Crystallisation Event (BCE). At that time a calculation is made to see what that "withdrawal" equates to in relation to the then LTA. If that takes you over the LTA then you pay an excess tax charge - either 55% (if the withdrawal is a lump sum) or 25% if the withdrawal is taken as income.
Scenario 1.
Pension "pot" of £1.2m. You take 25% out tax free. The £300k is assessed against the LA (£1,073,000) and its recorded that you have used up 27.96% of your LTA. The remaining £900k can stay in your pension & continue to grow and when you come to take any further monies then that withdrawal is assessed against the LTA.
Scenario 2.
You have a final salary DB scheme. You retire with a pension of £60k pa. This equates to a pension "pot" of £1.2m (on retirement pensions taken from a DB scheme is calculated at 20x the annual pension). You are over the LTA by £127,000. As you are taking an income the excess tax charge is calculated as 25% of £127k and therefore you incur a tax charge of £31,750. Usually you can have the tax taken off your annual pension so in this case your £60k annual pension would be reduced (I think there is a factor for calculating this but that's above my pay grade) but usually I believe it would reduce the pension by a couple of thousand.
I have a number of clients that have exceeded the LTA ( via a DB scheme) & even have personal pensions that they have not touched as any money coming out would trigger an excess tax charge.....even the 25% "tax free" element.
If anyone is close to having £1m in their pension pot I strongly advise that they speak to an IFA or an Accountant as you may want to start planning what to do BEFORE you come to retire.
A FASIR SUMMARY. THE ONLY THING i WOULD LIKE CLARIFY IF THE DIFFERENCE HERE BETWEEN A PENSION POT AND DB SCHEME. WITH YOUR PENSION POT, IN GOLFIE'S EXAMPLE, ANY FURTHER INCREASE IS ALSO CONSIDERED EXCESS FOR LTA PURPOSES. SO IF YOU GOT INVESTMENT GROWTH OVER THE NEXT TEN YEARS OF £500,000 (WHICH IS LESS THAN 5% PA GROWTH), ALL OF THAT GROWTH IS TAXED AS "EXCESS". WITH THE DB SCHEME IT IS ASSESSED AT THE POINT OF TAKING. SO EVEN IF YOU GET INCREASES IN THE PENSION (WHICH YOU ARE LIKELY TO GET WITH INFLATION) THERE IS NO FURTHER CHARGE
FOR THIS REASON I WOULD SUGGEST PEOPLE SPEAK TO AN IFA LONG BEFORE APPROACHING THE £1M. IF YOU'RE 50 AND HAVE £500K I WOULD SUGGEST A CHAT WORTHWHILE. THE ONLY TROUBLE IS IFA'S DON'T KNOW WHAT FUTURE GOVERNMENTS MAY DO!
Problem with the CGT rates being reduced is that if Labour get in after the next GE (which atm seems highly likely) then I doubt they will rush to put them back up again. Look at the Pension Lifetime Allowance - George Osborne started cutting it & it has now only just started to increase over the last year or so, although I haven't seen anything to say they will stop the CPI increase next April (at 10.1% I wouldn't be surprised if they did cap it).
ut a £3k allowance from 2024 for CGT is just ridiculous imo. Just doesn't touch the sides as any meaningful "allowance".
The Lifetime Allowance has been frozen until 2025/6. About the time inflation should be back under control! This will bring a lot of people into this sneeky tax, just as a result of normal pension saving. £1,073,000 sounds a lot but really isn't for a pension pot. Somebody at 30 on £40k and with the recomended 15% going into their pension pot and with decent returns could easily exceed a frozen LA by the time they reach state pension age.
Most people would assume that anyone with a million pounds of savings wasn't getting any tax relief so they could save even more - even if it is a "pension".
I don't think there's much chance of any uproar from the general public about this. Does seem a bit sneaky though to apply a special tax after you've already saved the money!
Would be better to make pensions more like ISAs. Anyone can benefit by putting up to £1,000,000 (say) into your pension over a lifetime. But after that you're big and strong enough to look after yourself without government support!
Sorry - not meaning to be too political - it's Sunday morning!
It's always seemed to me that the only reason for making pension contributions tax free was to encourage people to save into a pension and the main benefit of that to the Government and by extension tax payers was to ensure people did not need to claim benefits over and above the state pension when they finish work. Given that rationale, (and I appreciate it isn't the only rationale), the £1m is pretty generous and I wouldn't be at all surprised if it continues to be eroded.
Rishi Sunak suspended the indexation of the LTA when he was
chancellor. At present it will remain frozen until 2025/26 at least. Hard to
believe that around 10 years ago the LTA was £1.8m.
The problem with Golfie’s scenario 1 is that with a ‘pot’ of
£1.2m you cannot take the full 25% as tax free cash, you are limited to 25% of
the LTA (£1,073,100) which is £268,275. Any lump sum over this would be taxed
at 55%. Also, even if you could take £300k as cash it would use much more than 27.96%
of the LTA.
When you take tax free cash, you crystallise a proportion of
your pension fund. For example, to take a £250k lump sum you would need to crystallise
£1m of your pension; 93.2% of your LTA. The remaining £750k can of course remain
invested with any future growth on it being tested again against the LTA no
later than age 75. Therefore if you take the maximum tax free cash of £268,275
you use 100% of your LTA so, under current rules, you wouldn’t fully benefit
should the level be raised in the future.
For this reason, unless you need the TFC, for example to
clear a mortgage etc., I would be careful about taking too much too soon simply
to move it to a less efficient tax wrapper. Many now draw an ‘income’ from
their pension with a combination of tax free cash and taxable income. For
example, they crystallise each year, say, £50k of their pension (4.66% of LTA).
£12,500 is TFC, the remaining £37,500 is taxed as income. This kicks the point
at which you hit the LTA a long way down the road by which time many hope that
the limits will have risen tangibly.
There are arguments for and against allowing a pension to
exceed the LTA, Rob7Lee gives a good reason why continuing to fund a plan can
be a good idea. This, coupled with phased crystallisation, can be another. The
above all relates to personal pensions/SIPPs and DB schemes can be even more
involved.
Along with much of our tax regime, pension taxation is ridiculously
complex and I can only agree with posts that suggest taking professional
advice. Yes, it will cost a fee but it will help individuals avoid making
costly mistakes with what, for many, is their most valuable financial asset.
The big problem we, as a country have, is how the Lifetime Allowance & Annual Allowance in DB schemes are affecting its members.
I work a lot with Doctors and almost all are being affected by this issue, so much so that many are looking to retire early or not taking on extra shifts, as these can have a detrimental affect on their pension. Just having a pay rise can cause an excess tax charge !!
In a DC scheme you can regulate (to a certain extent) how much you put in, when you take it out & when you stop paying in. DB members dont really have that luxury. You are either in the scheme or you are out. You can not be in the NHS Pension Scheme and only pay in 5% to stop your "pot" growing quickly. A pension pot of £1,000,000 may sound a lot (and it is) but to a NHS Hospital Doctor or a GP that is equivalent to a pension of around £45kpa (as the old scheme also gives a tax free lump sum). Again, an annual pension at age 60 of £45k seems out of reach to most people and most people would bite both their arms off for it, but for a Doctor who has worked in the NHS all their lives it is very common. A Consultant at the top of their grade earns around £110k pa and with a Max pension being 40/80th then they will exceed this comfortably. And thats without any extra payments on top for being a lead clinician.
However, this isnt the main problem (as it CAN be managed somewhat if attacked early enough). The main problem is the Annual Allowance. As above, a DC scheme can be managed so as not to exceed £40k pa, but a DB scheme....no chance. Firstly it is retrospective, in so much as you only know AFTER the end of the tax year if you have exceeded the AA (in the NHS Scheme you are told in September /October, some 6 months after the input period has closed). Then....do you know how your pension "pot" is calculated in a DB scheme. Answers on a post card if you do, because I doubt very much Rishi Sunak or Jeremy Hunt do.
It has been discussed that DC & DB schemes should be calculated differently in regard to the LTA & AA and I am hoping that in the next Budget ( unlikely now) there will be changes - mainly having no limit going in for DB schemes, but keeping the LTA, and then the reverse for DC schemes with an AA limit going in but no LTA limit.
A million is a fair chunk, but it's easy to exceed that with the right investments. My pension pot when I moved jobs in Jan 2007 was around £60k (and at that point my salary was £65k), I did in around 2014 transfer in £110k from a DB scheme. I didn't pay in for about 5 of the next 15 years yet at 50 I'm already at best part of 700k, a large proportion being growth/return (I'd estimate around another £200k has been paid in so maybe about half the value).
Even if I don't pay in anymore, with £700k if I make a modest 5% per annum by the time I'm 60 it'll be north of £1.1m, by 65 probably £1.5m. If I achieve the 8% I've averaged then £1.5m & £2.2m.
First world problems I know, I don't imagine the rules will change anytime soon nor will the LTA increase, it is what it is as they say, not worth losing sleep over just manage your finances as sensibly as you can. Is still think I'm better exceeding the LTA but getting the 62% tax relief going in.
A million is a fair chunk, but it's easy to exceed that with the right investments. My pension pot when I moved jobs in Jan 2007 was around £60k (and at that point my salary was £65k), I did in around 2014 transfer in £110k from a DB scheme. I didn't pay in for about 5 of the next 15 years yet at 50 I'm already at best part of 700k, a large proportion being growth/return (I'd estimate around another £200k has been paid in so maybe about half the value).
Even if I don't pay in anymore, with £700k if I make a modest 5% per annum by the time I'm 60 it'll be north of £1.1m, by 65 probably £1.5m. If I achieve the 8% I've averaged then £1.5m & £2.2m.
First world problems I know, I don't imagine the rules will change anytime soon nor will the LTA increase, it is what it is as they say, not worth losing sleep over just manage your finances as sensibly as you can. Is still think I'm better exceeding the LTA but getting the 62% tax relief going in.
second time i believe you have mentioned 62% relief. How is it 62%? isn't it 42% or 47% if you're a higher rate tax payer?
Not sure how to find it but can some-one tell me what P/E ratio on the S&P is currently. In fact an online sourse would be helpful. I have always been overweight in US stocks, which have done me very well in the last 20 years but a bit nervous on them atm.
A million is a fair chunk, but it's easy to exceed that with the right investments. My pension pot when I moved jobs in Jan 2007 was around £60k (and at that point my salary was £65k), I did in around 2014 transfer in £110k from a DB scheme. I didn't pay in for about 5 of the next 15 years yet at 50 I'm already at best part of 700k, a large proportion being growth/return (I'd estimate around another £200k has been paid in so maybe about half the value).
Even if I don't pay in anymore, with £700k if I make a modest 5% per annum by the time I'm 60 it'll be north of £1.1m, by 65 probably £1.5m. If I achieve the 8% I've averaged then £1.5m & £2.2m.
First world problems I know, I don't imagine the rules will change anytime soon nor will the LTA increase, it is what it is as they say, not worth losing sleep over just manage your finances as sensibly as you can. Is still think I'm better exceeding the LTA but getting the 62% tax relief going in.
second time i believe you have mentioned 62% relief. How is it 62%? isn't it 42% or 47% if you're a higher rate tax payer?
Any earnings between £100k and £125,140 you begin to lose your tax free allowance (for every £2 earned you lose £1 of it) therefore meaning in that range you are actually paying 60% income tax (and 2% NI).
So in essence if you can by way of pension contributions bring your salary down to £100k you'll get that 62% relief.
Your Personal Allowance goes down by £1 for every £2 that your adjusted net income is above £100,000. This means your allowance is zero if your income is £125,140 or above.
Not sure how to find it but can some-one tell me what P/E ratio on the S&P is currently. In fact an online sourse would be helpful. I have always been overweight in US stocks, which have done me very well in the last 20 years but a bit nervous on them atm.
Not sure how to find it but can some-one tell me what P/E ratio on the S&P is currently. In fact an online sourse would be helpful. I have always been overweight in US stocks, which have done me very well in the last 20 years but a bit nervous on them atm.
Google is your friend.
Current P/E ratio for the S&P is 20.78%.
Thanks, that is high. That means effective earnings yield is less than 5%. Ratio of that to gilt yields must be pretty much all time low. I couldn't find via google.
Your Personal Allowance goes down by £1 for every £2 that your adjusted net income is above £100,000. This means your allowance is zero if your income is £125,140 or above.
ok for that band, but for most 42% so different decision.
Your Personal Allowance goes down by £1 for every £2 that your adjusted net income is above £100,000. This means your allowance is zero if your income is £125,140 or above.
ok for that band, but for most 42% so different decision.
Yes, only once you start getting above 100k. Obviously once you get way past £125k there's nothing you can do but suck up the 62%!
Not sure how to find it but can some-one tell me what P/E ratio on the S&P is currently. In fact an online sourse would be helpful. I have always been overweight in US stocks, which have done me very well in the last 20 years but a bit nervous on them atm.
Google is your friend.
Current P/E ratio for the S&P is 20.78%.
Thanks, that is high. That means effective earnings yield is less than 5%. Ratio of that to gilt yields must be pretty much all time low. I couldn't find via google.
Totally concur. A lot lower than it has been in recent years but these things tend to over shoot when correcting.
Lots of people agreeing that the interest rate rises were priced in on the recent dip. But now there's been a significant bounce. Various FED people talking about the market 'getting ahead of itself', implying higher rates for longer which will impact those discounted cash flows underlying the 'priced in' argument. If the trend for lower earnings, lower margins on rising costs carries on, then that PE is very high, as you say.
Whilst we don't have another earnings season until January and there are at least 3 well known seasonal 'bullish' plays coming up (Thanks Giving, Santa Rally + another I can't remember the name of), it's not hard to imagine that any noises about Black Friday not having gone as well as usual (or, more likely, no noise at all) might spark a sell-off.
On top of that the Saudis started talking oil up again yesterday (inflation) and the Chinese are locking down Beijing. It was optimism about the CCP relaxing their Zero Covid policy that kick-started this latest bounce. I don't think the oil bounce will last long but bounces don't help.
I thought that a recommendation for this particular TV show should be on this thread. I'm talking about a Netflix film called "Skandal". It's about the downfall of Wirecard. I had parked it in the same general category as WeWork and now the FTX scandal, and possibly Musk/Twitter. But it's different because whereas the last three teach us lessons about monstrous hubris of rich individuals, let's say giant global versions of Duchatelet, Wirecard was a monstrous global version of Southall/Farnell- straight up criminality from start to finish. And it features the role of the FT, in a situation that they probably didn't expect, of receiving threats and dealing with listening devices. It's well worth a watch. But the main reason why I'm putting it on this thread is that at one point, the FT editor points out that Wirecard was a huge constituent of the DAX. At that point I realised "shit! My European funds!" And then "double shit! my tech funds!" Much too late now of course, the damage is done, but any of you who had similar holdings will have been done by these guys. "Enjoy" 😡
That Vanguard Life Strategy 20% I've been moaning about, and thought about ditching for a long term fixed interest account... I didn't, and it has since recovered about 7%, which of course is way above what I would have earned had I pulled the money out and stuck it in a cash deposit. It's still down 13% on the last 12 months which is still shocking for a supposedly safe/cautious investment, but there seems to be a general belief that the bond markets might be heading for calmer waters, so I'll stick with it for now and review in the New Year.
I thought that a recommendation for this particular TV show should be on this thread. I'm talking about a Netflix film called "Skandal". It's about the downfall of Wirecard. I had parked it in the same general category as WeWork and now the FTX scandal, and possibly Musk/Twitter. But it's different because whereas the last three teach us lessons about monstrous hubris of rich individuals, let's say giant global versions of Duchatelet, Wirecard was a monstrous global version of Southall/Farnell- straight up criminality from start to finish. And it features the role of the FT, in a situation that they probably didn't expect, of receiving threats and dealing with listening devices. It's well worth a watch. But the main reason why I'm putting it on this thread is that at one point, the FT editor points out that Wirecard was a huge constituent of the DAX. At that point I realised "shit! My European funds!" And then "double shit! my tech funds!" Much too late now of course, the damage is done, but any of you who had similar holdings will have been done by these guys. "Enjoy" 😡
I read a really in depth an 'expose' of FTX. One person's view but was backed up by a lot of public domain twitter quotes juxtaposed with his view of what was going on. If he's right - link here, https://threadreaderapp.com/thread/1592502785873825794.html - FTX is going to make Bernie Madoff look like an amateur.
I would be interested from people on here that follow the digital currencies more closely, if what this guy is saying seems reasonable. Someone in that business I know well - Lars Holst, founder of GCEX - had to go on record to distance his firm from this kind of behaviour. I suspect he'll ride it out as he's got a long track record of success and integrity. At the least, it has given critics of the industry plenty of grist and is bound to undermine the one thing all these assets and currencies rely on - confidence.
I was just trying to open an account with Raisin to put a bit of cash on a 6 month fix at 3.4% with Zenith Bank. No, nor me but it's FSCS protected so ok. Anyway, I tend to be a bit anal about reading Ts and Cs and just as well - the bond is advertised as 3.4% but the Ts and Cs state 0.9%. I have not proceeded with the deposit, of course, and I'm sure it's just an admin error on their side. But it inspires no confidence at all if they can't get this right. If it had said 9% would they have paid that, I wonder? I'm going to have a trawl and see if I can find one they've got wrong to my possible advantage. Also, how many people just tick the boxes to say they agree without reading any of the document? Edit: I have emailed their customer services pointing out the error
Hi @IdleHans I started using Raisin but am not particularly impressed with it. I had to wait more than a week for an answer to a routine question, having failed to get any reply on the phone.
On the other hand I recommend staying close to the Money Savings Expert forum, they may have nicked our thread title but they are great at monitoring every interest rate move and discussion of all the weird and wonderful “banks”. Sub-threads for each kind of savings account.
Cheers @PragueAddick I hadn't seen that before. Raisin was only to ensure I don't exceed the FSCS limit with another bank as I move savings out of HL's platform. I'm currently looking at Atom but I will check the link youve sent and make sure any comments are positive. Many thanks.
Comments
But a £3k allowance from 2024 for CGT is just ridiculous imo. Just doesn't touch the sides as any meaningful "allowance".
£1,073,000 sounds a lot but really isn't for a pension pot.
Somebody at 30 on £40k and with the recomended 15% going into their pension pot and with decent returns could easily exceed a frozen LA by the time they reach state pension age.
The Lifetime Allowance (LTA) is assessed when you take any money out of your pension. Even the 25% tax free allowance. This is known as a Benefit Crystallisation Event (BCE). At that time a calculation is made to see what that "withdrawal" equates to in relation to the then LTA. If that takes you over the LTA then you pay an excess tax charge - either 55% (if the withdrawal is a lump sum) or 25% if the withdrawal is taken as income.
Scenario 1.
Pension "pot" of £1.2m. You take 25% out tax free. The £300k is assessed against the LA (£1,073,000) and its recorded that you have used up 27.96% of your LTA. The remaining £900k can stay in your pension & continue to grow and when you come to take any further monies then that withdrawal is assessed against the LTA.
Scenario 2.
You have a final salary DB scheme. You retire with a pension of £60k pa. This equates to a pension "pot" of £1.2m (on retirement pensions taken from a DB scheme is calculated at 20x the annual pension). You are over the LTA by £127,000. As you are taking an income the excess tax charge is calculated as 25% of £127k and therefore you incur a tax charge of £31,750. Usually you can have the tax taken off your annual pension so in this case your £60k annual pension would be reduced (I think there is a factor for calculating this but that's above my pay grade) but usually I believe it would reduce the pension by a couple of thousand.
I have a number of clients that have exceeded the LTA ( via a DB scheme) & even have personal pensions that they have not touched as any money coming out would trigger an excess tax charge.....even the 25% "tax free" element.
If anyone is close to having £1m in their pension pot I strongly advise that they speak to an IFA or an Accountant as you may want to start planning what to do BEFORE you come to retire.
I don't think there's much chance of any uproar from the general public about this. Does seem a bit sneaky though to apply a special tax after you've already saved the money!
Would be better to make pensions more like ISAs. Anyone can benefit by putting up to £1,000,000 (say) into your pension over a lifetime. But after that you're big and strong enough to look after yourself without government support!
Sorry - not meaning to be too political - it's Sunday morning!
I agree - £1 million is a high enough limit for full tax relief and is beyond the dreams of the vast majority of the population. Once reached then other forms of investment can be used, funded from net income, and being outside of a pension means it does not attract income tax when realised - apart from certain investments such as property and other physical assets (e.g. art) that would attract CGT. Even if it's just SS or cash ISAs where £40k a year can be invested as a couple.
Rishi Sunak suspended the indexation of the LTA when he was chancellor. At present it will remain frozen until 2025/26 at least. Hard to believe that around 10 years ago the LTA was £1.8m.
The problem with Golfie’s scenario 1 is that with a ‘pot’ of £1.2m you cannot take the full 25% as tax free cash, you are limited to 25% of the LTA (£1,073,100) which is £268,275. Any lump sum over this would be taxed at 55%. Also, even if you could take £300k as cash it would use much more than 27.96% of the LTA.
When you take tax free cash, you crystallise a proportion of your pension fund. For example, to take a £250k lump sum you would need to crystallise £1m of your pension; 93.2% of your LTA. The remaining £750k can of course remain invested with any future growth on it being tested again against the LTA no later than age 75. Therefore if you take the maximum tax free cash of £268,275 you use 100% of your LTA so, under current rules, you wouldn’t fully benefit should the level be raised in the future.
For this reason, unless you need the TFC, for example to clear a mortgage etc., I would be careful about taking too much too soon simply to move it to a less efficient tax wrapper. Many now draw an ‘income’ from their pension with a combination of tax free cash and taxable income. For example, they crystallise each year, say, £50k of their pension (4.66% of LTA). £12,500 is TFC, the remaining £37,500 is taxed as income. This kicks the point at which you hit the LTA a long way down the road by which time many hope that the limits will have risen tangibly.
There are arguments for and against allowing a pension to exceed the LTA, Rob7Lee gives a good reason why continuing to fund a plan can be a good idea. This, coupled with phased crystallisation, can be another. The above all relates to personal pensions/SIPPs and DB schemes can be even more involved.
Along with much of our tax regime, pension taxation is ridiculously complex and I can only agree with posts that suggest taking professional advice. Yes, it will cost a fee but it will help individuals avoid making costly mistakes with what, for many, is their most valuable financial asset.
I work a lot with Doctors and almost all are being affected by this issue, so much so that many are looking to retire early or not taking on extra shifts, as these can have a detrimental affect on their pension. Just having a pay rise can cause an excess tax charge !!
In a DC scheme you can regulate (to a certain extent) how much you put in, when you take it out & when you stop paying in. DB members dont really have that luxury. You are either in the scheme or you are out. You can not be in the NHS Pension Scheme and only pay in 5% to stop your "pot" growing quickly. A pension pot of £1,000,000 may sound a lot (and it is) but to a NHS Hospital Doctor or a GP that is equivalent to a pension of around £45kpa (as the old scheme also gives a tax free lump sum). Again, an annual pension at age 60 of £45k seems out of reach to most people and most people would bite both their arms off for it, but for a Doctor who has worked in the NHS all their lives it is very common. A Consultant at the top of their grade earns around £110k pa and with a Max pension being 40/80th then they will exceed this comfortably. And thats without any extra payments on top for being a lead clinician.
However, this isnt the main problem (as it CAN be managed somewhat if attacked early enough). The main problem is the Annual Allowance. As above, a DC scheme can be managed so as not to exceed £40k pa, but a DB scheme....no chance. Firstly it is retrospective, in so much as you only know AFTER the end of the tax year if you have exceeded the AA (in the NHS Scheme you are told in September /October, some 6 months after the input period has closed). Then....do you know how your pension "pot" is calculated in a DB scheme. Answers on a post card if you do, because I doubt very much Rishi Sunak or Jeremy Hunt do.
It has been discussed that DC & DB schemes should be calculated differently in regard to the LTA & AA and I am hoping that in the next Budget ( unlikely now) there will be changes - mainly having no limit going in for DB schemes, but keeping the LTA, and then the reverse for DC schemes with an AA limit going in but no LTA limit.
You know what, I should charge for this...😄
Even if I don't pay in anymore, with £700k if I make a modest 5% per annum by the time I'm 60 it'll be north of £1.1m, by 65 probably £1.5m. If I achieve the 8% I've averaged then £1.5m & £2.2m.
First world problems I know, I don't imagine the rules will change anytime soon nor will the LTA increase, it is what it is as they say, not worth losing sleep over just manage your finances as sensibly as you can. Is still think I'm better exceeding the LTA but getting the 62% tax relief going in.
I have always been overweight in US stocks, which have done me very well in the last 20 years but a bit nervous on them atm.
So in essence if you can by way of pension contributions bring your salary down to £100k you'll get that 62% relief.
Your Personal Allowance goes down by £1 for every £2 that your adjusted net income is above £100,000. This means your allowance is zero if your income is £125,140 or above.
Current P/E ratio for the S&P is 20.78%.
Lots of people agreeing that the interest rate rises were priced in on the recent dip. But now there's been a significant bounce. Various FED people talking about the market 'getting ahead of itself', implying higher rates for longer which will impact those discounted cash flows underlying the 'priced in' argument. If the trend for lower earnings, lower margins on rising costs carries on, then that PE is very high, as you say.
Whilst we don't have another earnings season until January and there are at least 3 well known seasonal 'bullish' plays coming up (Thanks Giving, Santa Rally + another I can't remember the name of), it's not hard to imagine that any noises about Black Friday not having gone as well as usual (or, more likely, no noise at all) might spark a sell-off.
On top of that the Saudis started talking oil up again yesterday (inflation) and the Chinese are locking down Beijing. It was optimism about the CCP relaxing their Zero Covid policy that kick-started this latest bounce. I don't think the oil bounce will last long but bounces don't help.
I would be interested from people on here that follow the digital currencies more closely, if what this guy is saying seems reasonable. Someone in that business I know well - Lars Holst, founder of GCEX - had to go on record to distance his firm from this kind of behaviour. I suspect he'll ride it out as he's got a long track record of success and integrity. At the least, it has given critics of the industry plenty of grist and is bound to undermine the one thing all these assets and currencies rely on - confidence.
Anyway, I tend to be a bit anal about reading Ts and Cs and just as well - the bond is advertised as 3.4% but the Ts and Cs state 0.9%. I have not proceeded with the deposit, of course, and I'm sure it's just an admin error on their side. But it inspires no confidence at all if they can't get this right. If it had said 9% would they have paid that, I wonder? I'm going to have a trawl and see if I can find one they've got wrong to my possible advantage.
Also, how many people just tick the boxes to say they agree without reading any of the document?
Edit: I have emailed their customer services pointing out the error
https://forums.moneysavingexpert.com/categories/savings-investments
Raisin was only to ensure I don't exceed the FSCS limit with another bank as I move savings out of HL's platform. I'm currently looking at Atom but I will check the link youve sent and make sure any comments are positive. Many thanks.