Yes, weird that he capped the tax-free Allowance at 25% of the current LTA - so £268,275.
It seems the unlimited LTA doesn't take effect until the 2024/25 tax year. Next tax year it seems to suggest that any excess tax charges will somply not be payable/collected.
Also, tapering has increased to £260k (from £240k)
I dont think the £10k MPAA cap will hinder it too much. Those who had a problem & have taken pension benefits probably have a sizeable pension anyway. And £10k in pension contributions per tax year isnt too shabby.
Does anyknow know about those with fixed protection at higher levels than the £1.07m. Eg Is it fair to assume that someone with fixed protection at say £1.25m isn't now penalised by this new rule. Am I also right in assuming that it is really only of benefit to those die before they are 75 as pots above LTA then receive a tax surcharge of 25% anyway.
According to the OBR, this policy will only keep 15,000 extra people in work at an annual cost of £1bn so the Treasury is spending more than £66,000 per annum on each of those individuals. One other benefit for those beneficiaries of the relaxation of the rules is that the extra monies going into their pension pot will fall outside IHT if they die before reaching 75.
I'm sure those junior doctors who are striking because they are being paid £14.09 per hour are ecstatic that the Government can afford to reward their seniors in such a generous way.
Today's "junior" doctors are tomorrow's Consultants, who will be very thankful that there is no LTA and a bigger Annual Allowance.
Looks like I could be very busy over the next weeks & months catching up with my DR clients who will be mightily relieved about this. My only annoyance is that I have spent the best part of 6 years detailing to them how we could mitigate these tax charges only now to be seen to have wasted my breath.
Thanks Chancellors.....past & present.
Don't worry, I fully expect it to be reversed when Labour get in!
…..out of interest, if it is reversed when Labour get in, does that mean that those who came back to work/carried on working and now breach the £1m LTA cap would be caught out? If so, then assuming the high likelihood of Labour getting in some time soon, these workers would be mad to come back/continue now, wouldn’t they?
You'd hope it wasn't retrospective but you never can 100% know/predict. Labour have already come out and said they will reverse it (except for Doctors!). That's why I said it may hasten my retirement as I suspect once drawing they won't change or will freeze it, not so sure if not drawing.
Personally I think it's a bit of a storm in a tea cup the negativity, there's lot of bits around the edges that people forget (or don't know) such as if someone earns north of 150k, they start to lose the allowance down to £10k by about £210k anyway, so anyone on a salary at that level or above and paying in more than £10k is not receiving any tax benefit in and will be hammered on the way out, hence why most don't bother. I've not seen anything yet that says that's changing under the new proposals but may have missed it.
The £150k start point for tapered relief was increased to a threshold income of £200k and an adjusted income of £240k. This change was announced in the 2020 budget.
I'm not sure how this is affected by the increase to £60k for the annual allowance - currently you lose £1 of the annual allowance for every £2 above the threshold so reducing it from £40k down to £10k if you are £60k above the threshold. Will it now still be £1 lost for every £2 over from £60k down to £10k thereby maximum reduction is at £100k over the threshold?
Firstly, Credit Suisse isn't the "most trusted bank in the world". And if it goes bust then an individual's money is protected up to £85K per individual. How much protection does someone have if a Crypto Exchange goes bust?
Firstly, Credit Suisse isn't the "most trusted bank in the world". And if it goes bust then an individual's money is protected up to £85K per individual. How much protection does someone have if a Crypto Exchange goes bust?
not much, which is why you shouldn't ever keep any decent size on a centralised exchange.
According to the OBR, this policy will only keep 15,000 extra people in work at an annual cost of £1bn so the Treasury is spending more than £66,000 per annum on each of those individuals. One other benefit for those beneficiaries of the relaxation of the rules is that the extra monies going into their pension pot will fall outside IHT if they die before reaching 75.
I'm sure those junior doctors who are striking because they are being paid £14.09 per hour are ecstatic that the Government can afford to reward their seniors in such a generous way.
Today's "junior" doctors are tomorrow's Consultants, who will be very thankful that there is no LTA and a bigger Annual Allowance.
Looks like I could be very busy over the next weeks & months catching up with my DR clients who will be mightily relieved about this. My only annoyance is that I have spent the best part of 6 years detailing to them how we could mitigate these tax charges only now to be seen to have wasted my breath.
Thanks Chancellors.....past & present.
Don't worry, I fully expect it to be reversed when Labour get in!
…..out of interest, if it is reversed when Labour get in, does that mean that those who came back to work/carried on working and now breach the £1m LTA cap would be caught out? If so, then assuming the high likelihood of Labour getting in some time soon, these workers would be mad to come back/continue now, wouldn’t they?
You'd hope it wasn't retrospective but you never can 100% know/predict. Labour have already come out and said they will reverse it (except for Doctors!). That's why I said it may hasten my retirement as I suspect once drawing they won't change or will freeze it, not so sure if not drawing.
Personally I think it's a bit of a storm in a tea cup the negativity, there's lot of bits around the edges that people forget (or don't know) such as if someone earns north of 150k, they start to lose the allowance down to £10k by about £210k anyway, so anyone on a salary at that level or above and paying in more than £10k is not receiving any tax benefit in and will be hammered on the way out, hence why most don't bother. I've not seen anything yet that says that's changing under the new proposals but may have missed it.
The £150k start point for tapered relief was increased to a threshold income of £200k and an adjusted income of £240k. This change was announced in the 2020 budget.
I'm not sure how this is affected by the increase to £60k for the annual allowance - currently you lose £1 of the annual allowance for every £2 above the threshold so reducing it from £40k down to £10k if you are £60k above the threshold. Will it now still be £1 lost for every £2 over from £60k down to £10k thereby maximum reduction is at £100k over the threshold?
Adjusted income for tapering increased in yesterday Budget to £260k.
Yes, weird that he capped the tax-free Allowance at 25% of the current LTA - so £268,275.
It seems the unlimited LTA doesn't take effect until the 2024/25 tax year. Next tax year it seems to suggest that any excess tax charges will somply not be payable/collected.
Also, tapering has increased to £260k (from £240k)
I dont think the £10k MPAA cap will hinder it too much. Those who had a problem & have taken pension benefits probably have a sizeable pension anyway. And £10k in pension contributions per tax year isnt too shabby.
Does anyknow know about those with fixed protection at higher levels than the £1.07m. Eg Is it fair to assume that someone with fixed protection at say £1.25m isn't now penalised by this new rule. Am I also right in assuming that it is really only of benefit to those die before they are 75 as pots above LTA then receive a tax surcharge of 25% anyway.
Your fixed protection still stands. So if you have it fixed at £1.5m then the 25% tax-free element will still be at £375k.
I don't know too many people with fixed protection as it limits you somewhat. I have a few clients with Individual Protection, mostly IP16. But their protection is not much off the current LTA - one was at £1.1m another closer to £1.2.
What has irked me today listening to the news/ debates about all if this ( and the BBC seem to be the worst) is that the keep saying that the "tax free allowance has been changed".
Noooooo.
Pensions have always been taxable. All that has been abolished is the upper limit where an excess tax charge kicks in.
The only"tax free" part to a pension is
1) it grows free of capital gains tax. Gordon Brown taxed dividends in his first Budget back in 1997.
2) it's free of Inheritance tax.
3) you can pass the fund onto you dependants tax free if you die before age 75. After 75 it will be taxed based on their notional tax rate
4) you can withdraw a % (for most people its 25%) tax free - the residual fund is taxable. You might be lucky that in retirement your pension income us so low that you aren't taxed on it - but seeing as the Personal Allowance has been frozen at £12500 and the State Pension for most people will be around £10k pa as from April - then even a small amount of pension income will soon be taxed.
If you want to make a German laugh,tell him the annual amount of the UK State Pension. When he’s finished laughing, tell him that the State takes back at least 20% in income tax.
He will internally combust, and after finally recovering will walk away, shaking his head and muttering “Island monkeys”.
I have never understood why you’d tax a State Pension.
If you want to make a German laugh,tell him the annual amount of the UK State Pension. When he’s finished laughing, tell him that the State takes back at least 20% in income tax.
He will internally combust, and after finally recovering will walk away, shaking his head and muttering “Island monkeys”.
I have never understood why you’d tax a State Pension.
I agree - once the state retirement pension is being taken the personal tax allowance should equal the annual state pension income or the prevailing personal allowance whichever is the most (and should not be lost if any personal pension and/or other income takes you above the £100k).
Nobody gets tax relief on their NI contributions!!
The pension changes are described as a tax giveaway but it is more accurately abolishing unwarranted penal taxation that in the long run was bound to reduce HMRC tax revenue.
The excess over the LTA is taxed at 55% if taken in cash and if taken in income bears a 25% tax charge in addition to income tax at 40% in payment. That is nothing more than penal tax designed to restrict pension savings. Tax relief exists to encourage savings but the more we save the more the Treasury perceives it as a loss of tax revenue.
The fact is that pensions tax relief is no big deal. Say you put £1,000 into your pension and as a higher rate tax payer you deny the Government £400 of tax revenue. That £1,000 grows to £3,000 after investment returns are added. You then pay 40% income tax on the £3,000 as it is drawn down plus 40% tax on any additional investment return. (The 55% LTA charge is presumably HMRC’s equivalent to the income tax had it been paid as pension). So the £3,000 pension pot is worth at least £1,650 as far as HMRC is concerned. The tax free lump sum simply makes the situation more fair, rather than the generous giveaway it is portrayed as.
Yes you might pass the funds to the next generation but it will at some stage attract tax.
So why would any restrictions be put on pensions savings at all when they generate significant long term tax revenues out of all proportion to the initial tax relief given to encourage savings.
The only reason is that Governments do not look further ahead than the term of their office and if they can increase tax revenue by restricting todays tax relief bill they will do so regardless of the loss of higher tax revenue many years ahead.
Its my belief that the AA & LTA reductions over the past 6 or 7 years were wasted tax targets for the Treasury as very few people understood them....or even knew what they meant.
It's only really come to the fore because of the serious issues it was causing NHS Doctors and the effects that was having on staff numbers. Also, the way the excess tax on the Annual Allowance is calculated and charged is retrospective - you can't calculate it (for DB schemes) until after the tax year has finished & so you are faced with a tax bill 6-12 months after the event with no recourse to do anything about it. Apart from leaving the scheme !
I do think scrapping the LTA was a bit extreme & it would have been better changing how any excess is charged. Same goes for the LTA. I said on here a few weeks back that there should be 2 regimes for taxing pension excesses - one for DC scheme where you can control the amount going in and (to some extent) the growth and another for DB schemes where you have no control over either.
One final piece. The current LTA is around £1.1m. To reach that you would (in the traditional final salary scheme of an annual pension + 3 times lump sum) need an annual pension on retirement of £47pa. Might seem a lit to most people, and it is. But an NHS Consultant on their top scale (so 20 odd years of Consultant service) would be on around £115kpa. On top of that there would have other pensionable income such as merit awards which can add another £10k. Based on 40 years service that would be an annual pension of £62.5k. and therefore almost £350k over the LTA. (62.5 x20 plus 3x lump sum) and therefore an excess tax charge of c£180k. Thats why it needed to be changed.
Its my belief that the AA & LTA reductions over the past 6 or 7 years were wasted tax targets for the Treasury as very few people understood them....or even knew what they meant.
It's only really come to the fore because of the serious issues it was causing NHS Doctors and the effects that was having on staff numbers. Also, the way the excess tax on the Annual Allowance is calculated and charged is retrospective - you can't calculate it (for DB schemes) until after the tax year has finished & so you are faced with a tax bill 6-12 months after the event with no recourse to do anything about it. Apart from leaving the scheme !
I do think scrapping the LTA was a bit extreme & it would have been better changing how any excess is charged. Same goes for the LTA. I said on here a few weeks back that there should be 2 regimes for taxing pension excesses - one for DC scheme where you can control the amount going in and (to some extent) the growth and another for DB schemes where you have no control over either.
One final piece. The current LTA is around £1.1m. To reach that you would (in the traditional final salary scheme of an annual pension + 3 times lump sum) need an annual pension on retirement of £47pa. Might seem a lit to most people, and it is. But an NHS Consultant on their top scale (so 20 odd years of Consultant service) would be on around £115kpa. On top of that there would have other pensionable income such as merit awards which can add another £10k. Based on 40 years service that would be an annual pension of £62.5k. and therefore almost £350k over the LTA. (62.5 x20 plus 3x lump sum) and therefore an excess tax charge of c£180k. Thats why it needed to be changed.
Completely disagree that scrapping the LTA limit was extreme. It was extreme introducing it in the first place. It was simply an easy target for reducing the annual cost to the Treasury.
There is absolutely no justification for capping final salary pensions where the employer has funded 90% of the cost. There is no tax "leakage" as the employer would have got the same tax relief as an expense whether paid as salary or pension. So what justification is there for taxing the recipient over and above normal income tax. HMRC had to invent something for DB schemes for no other reason than they couldn't be seen as just attacking money purchase schemes because it was convenient. The absurdity is obvious given the LTA valuation and tax payable on a final salary scheme is the same whether the pension is paid from age 55 or 70 and wether or not it has inflation proofing when clearly one pension could be at least twice the value of the other but bearing an identical tax. It is as non-sensical a tax levy as you could dream up
Its my belief that the AA & LTA reductions over the past 6 or 7 years were wasted tax targets for the Treasury as very few people understood them....or even knew what they meant.
It's only really come to the fore because of the serious issues it was causing NHS Doctors and the effects that was having on staff numbers. Also, the way the excess tax on the Annual Allowance is calculated and charged is retrospective - you can't calculate it (for DB schemes) until after the tax year has finished & so you are faced with a tax bill 6-12 months after the event with no recourse to do anything about it. Apart from leaving the scheme !
I do think scrapping the LTA was a bit extreme & it would have been better changing how any excess is charged. Same goes for the LTA. I said on here a few weeks back that there should be 2 regimes for taxing pension excesses - one for DC scheme where you can control the amount going in and (to some extent) the growth and another for DB schemes where you have no control over either.
One final piece. The current LTA is around £1.1m. To reach that you would (in the traditional final salary scheme of an annual pension + 3 times lump sum) need an annual pension on retirement of £47pa. Might seem a lit to most people, and it is. But an NHS Consultant on their top scale (so 20 odd years of Consultant service) would be on around £115kpa. On top of that there would have other pensionable income such as merit awards which can add another £10k. Based on 40 years service that would be an annual pension of £62.5k. and therefore almost £350k over the LTA. (62.5 x20 plus 3x lump sum) and therefore an excess tax charge of c£180k. Thats why it needed to be changed.
Completely disagree that scrapping the LTA limit was extreme. It was extreme introducing it in the first place. It was simply an easy target for reducing the annual cost to the Treasury.
There is absolutely no justification for capping final salary pensions where the employer has funded 90% of the cost. There is no tax "leakage" as the employer would have got the same tax relief as an expense whether paid as salary or pension. So what justification is there for taxing the recipient over and above normal income tax. HMRC had to invent something for DB schemes for no other reason than they couldn't be seen as just attacking money purchase schemes because it was convenient. The absurdity is obvious given the LTA valuation and tax payable on a final salary scheme is the same whether the pension is paid from age 55 or 70 and wether or not it has inflation proofing when clearly one pension could be at least twice the value of the other but bearing an identical tax. It is as non-sensical a tax levy as you could dream up
I don't disagree with you at all. By "extreme" I suppose I meant that advisors like myself have spent years discussing this with clients & going round the houses with what it all means & how (if any) ways are possible to mitigate any impending tax charges.
Now in one fell swoop all my advice & discussions are null & void.
Its my belief that the AA & LTA reductions over the past 6 or 7 years were wasted tax targets for the Treasury as very few people understood them....or even knew what they meant.
It's only really come to the fore because of the serious issues it was causing NHS Doctors and the effects that was having on staff numbers. Also, the way the excess tax on the Annual Allowance is calculated and charged is retrospective - you can't calculate it (for DB schemes) until after the tax year has finished & so you are faced with a tax bill 6-12 months after the event with no recourse to do anything about it. Apart from leaving the scheme !
I do think scrapping the LTA was a bit extreme & it would have been better changing how any excess is charged. Same goes for the LTA. I said on here a few weeks back that there should be 2 regimes for taxing pension excesses - one for DC scheme where you can control the amount going in and (to some extent) the growth and another for DB schemes where you have no control over either.
One final piece. The current LTA is around £1.1m. To reach that you would (in the traditional final salary scheme of an annual pension + 3 times lump sum) need an annual pension on retirement of £47pa. Might seem a lit to most people, and it is. But an NHS Consultant on their top scale (so 20 odd years of Consultant service) would be on around £115kpa. On top of that there would have other pensionable income such as merit awards which can add another £10k. Based on 40 years service that would be an annual pension of £62.5k. and therefore almost £350k over the LTA. (62.5 x20 plus 3x lump sum) and therefore an excess tax charge of c£180k. Thats why it needed to be changed.
Completely disagree that scrapping the LTA limit was extreme. It was extreme introducing it in the first place. It was simply an easy target for reducing the annual cost to the Treasury.
There is absolutely no justification for capping final salary pensions where the employer has funded 90% of the cost. There is no tax "leakage" as the employer would have got the same tax relief as an expense whether paid as salary or pension. So what justification is there for taxing the recipient over and above normal income tax. HMRC had to invent something for DB schemes for no other reason than they couldn't be seen as just attacking money purchase schemes because it was convenient. The absurdity is obvious given the LTA valuation and tax payable on a final salary scheme is the same whether the pension is paid from age 55 or 70 and wether or not it has inflation proofing when clearly one pension could be at least twice the value of the other but bearing an identical tax. It is as non-sensical a tax levy as you could dream up
I don't disagree with you at all. By "extreme" I suppose I meant that advisors like myself have spent years discussing this with clients & going round the houses with what it all means & how (if any) ways are possible to mitigate any impending tax charges.
Now in one fell swoop all my advice & discussions are null & void.
……..dont’t fret Colin. Labour’s inevitable, eventual ascent to power will reinstate the need for your exceptional skill set in this area!
Friends, forget about crypto currencies as your speculative path to riches. I am here to tell you that the HSBC Global Money account can turn you into the (proper) currency trader you always fancied yourself as.
You need an HSBC current account, then you transfer wedge into the Global Money "partition", and then you can transfer freely between 14 currencies, at mid market rates, no fees, and its super-slick. Gives you 50 seconds to accept the exchange rate and bang, you are done.
Now the funny thing is, HSBC have not quite worked out why they are offering this account. I belatedly discovered that right now you can only pay GBP in, not foreign currencies. This won't bother most of you. However if you get regular wedge in, say, euros, maybe from renting out your little place on the French coast, you cannot send that money back in euros, to the euro sub-partition in your GM account, and then convert it back to GBP at the mid market rate. WTF? But they coyly say in their T&Cs, that this will be possible "in the future". Why don't they offer it now? Because, big banks... But you definitely can use it to trade currency in ways previously enjoyed only by pro traders. I have a funny feeling that when HSBC twig that mug punters are using it this way they will put a stop to it, as we mug punters are not allowed to do such things, are we? So get in and make hay while the sun shines...
Friends, forget about crypto currencies as your speculative path to riches. I am here to tell you that the HSBC Global Money account can turn you into the (proper) currency trader you always fancied yourself as.
You need an HSBC current account, then you transfer wedge into the Global Money "partition", and then you can transfer freely between 14 currencies, at mid market rates, no fees, and its super-slick. Gives you 50 seconds to accept the exchange rate and bang, you are done.
Now the funny thing is, HSBC have not quite worked out why they are offering this account. I belatedly discovered that right now you can only pay GBP in, not foreign currencies. This won't bother most of you. However if you get regular wedge in, say, euros, maybe from renting out your little place on the French coast, you cannot send that money back in euros, to the euro sub-partition in your GM account, and then convert it back to GBP at the mid market rate. WTF? But they coyly say in their T&Cs, that this will be possible "in the future". Why don't they offer it now? Because, big banks... But you definitely can use it to trade currency in ways previously enjoyed only by pro traders. I have a funny feeling that when HSBC twig that mug punters are using it this way they will put a stop to it, as we mug punters are not allowed to do such things, are we? So get in and make hay while the sun shines...
I actually think this account is a deliberate strategy from HSBC to counter the various fintech payment and currency firms. A couple of years ago, I was selecting a new payment provider for a company that had 'offices' in over 70 countries. There were various fintech options (e.g. Adyen, who were in the same building as us and the respective company owners knew each other) but in the end we went for HSBC because it was cheap and easy.
It also provided a 'virtual' account in any country. I suspect that this functionality isn't yet available to retail customers, if you can't yet pay in Euros but suspect they are being honest when they say it's on its way.
Its my belief that the AA & LTA reductions over the past 6 or 7 years were wasted tax targets for the Treasury as very few people understood them....or even knew what they meant.
It's only really come to the fore because of the serious issues it was causing NHS Doctors and the effects that was having on staff numbers. Also, the way the excess tax on the Annual Allowance is calculated and charged is retrospective - you can't calculate it (for DB schemes) until after the tax year has finished & so you are faced with a tax bill 6-12 months after the event with no recourse to do anything about it. Apart from leaving the scheme !
I do think scrapping the LTA was a bit extreme & it would have been better changing how any excess is charged. Same goes for the LTA. I said on here a few weeks back that there should be 2 regimes for taxing pension excesses - one for DC scheme where you can control the amount going in and (to some extent) the growth and another for DB schemes where you have no control over either.
One final piece. The current LTA is around £1.1m. To reach that you would (in the traditional final salary scheme of an annual pension + 3 times lump sum) need an annual pension on retirement of £47pa. Might seem a lit to most people, and it is. But an NHS Consultant on their top scale (so 20 odd years of Consultant service) would be on around £115kpa. On top of that there would have other pensionable income such as merit awards which can add another £10k. Based on 40 years service that would be an annual pension of £62.5k. and therefore almost £350k over the LTA. (62.5 x20 plus 3x lump sum) and therefore an excess tax charge of c£180k. Thats why it needed to be changed.
Even with rising interest rates, anyone on a DC scheme is not going to be able to provide a 62k pension on 1m pension pot.
Yet the risks are far higher for the DC contributor, so I don't have a lot of sympathy for DB schemes and certainly don't think they should get special treatment, particularly not those guaranteed by tax payers' money.
Friends, forget about crypto currencies as your speculative path to riches. I am here to tell you that the HSBC Global Money account can turn you into the (proper) currency trader you always fancied yourself as.
You need an HSBC current account, then you transfer wedge into the Global Money "partition", and then you can transfer freely between 14 currencies, at mid market rates, no fees, and its super-slick. Gives you 50 seconds to accept the exchange rate and bang, you are done.
Now the funny thing is, HSBC have not quite worked out why they are offering this account. I belatedly discovered that right now you can only pay GBP in, not foreign currencies. This won't bother most of you. However if you get regular wedge in, say, euros, maybe from renting out your little place on the French coast, you cannot send that money back in euros, to the euro sub-partition in your GM account, and then convert it back to GBP at the mid market rate. WTF? But they coyly say in their T&Cs, that this will be possible "in the future". Why don't they offer it now? Because, big banks... But you definitely can use it to trade currency in ways previously enjoyed only by pro traders. I have a funny feeling that when HSBC twig that mug punters are using it this way they will put a stop to it, as we mug punters are not allowed to do such things, are we? So get in and make hay while the sun shines...
my guess is they're either using or building a competitor to currencycloud who offer white label midmarket rates to the likes of revolut, etoro etc.
Its my belief that the AA & LTA reductions over the past 6 or 7 years were wasted tax targets for the Treasury as very few people understood them....or even knew what they meant.
It's only really come to the fore because of the serious issues it was causing NHS Doctors and the effects that was having on staff numbers. Also, the way the excess tax on the Annual Allowance is calculated and charged is retrospective - you can't calculate it (for DB schemes) until after the tax year has finished & so you are faced with a tax bill 6-12 months after the event with no recourse to do anything about it. Apart from leaving the scheme !
I do think scrapping the LTA was a bit extreme & it would have been better changing how any excess is charged. Same goes for the LTA. I said on here a few weeks back that there should be 2 regimes for taxing pension excesses - one for DC scheme where you can control the amount going in and (to some extent) the growth and another for DB schemes where you have no control over either.
One final piece. The current LTA is around £1.1m. To reach that you would (in the traditional final salary scheme of an annual pension + 3 times lump sum) need an annual pension on retirement of £47pa. Might seem a lit to most people, and it is. But an NHS Consultant on their top scale (so 20 odd years of Consultant service) would be on around £115kpa. On top of that there would have other pensionable income such as merit awards which can add another £10k. Based on 40 years service that would be an annual pension of £62.5k. and therefore almost £350k over the LTA. (62.5 x20 plus 3x lump sum) and therefore an excess tax charge of c£180k. Thats why it needed to be changed.
Even with rising interest rates, anyone on a DC scheme is not going to be able to provide a 62k pension on 1m pension pot.
Yet the risks are far higher for the DC contributor, so I don't have a lot of sympathy for DB schemes and certainly don't think they should get special treatment, particularly not those guaranteed by tax payers' money.
If buying an annuity it'd be nearer £2m on joint life with 3% escalation, if you want RPi then probably heading towards £3m.
Its my belief that the AA & LTA reductions over the past 6 or 7 years were wasted tax targets for the Treasury as very few people understood them....or even knew what they meant.
It's only really come to the fore because of the serious issues it was causing NHS Doctors and the effects that was having on staff numbers. Also, the way the excess tax on the Annual Allowance is calculated and charged is retrospective - you can't calculate it (for DB schemes) until after the tax year has finished & so you are faced with a tax bill 6-12 months after the event with no recourse to do anything about it. Apart from leaving the scheme !
I do think scrapping the LTA was a bit extreme & it would have been better changing how any excess is charged. Same goes for the LTA. I said on here a few weeks back that there should be 2 regimes for taxing pension excesses - one for DC scheme where you can control the amount going in and (to some extent) the growth and another for DB schemes where you have no control over either.
One final piece. The current LTA is around £1.1m. To reach that you would (in the traditional final salary scheme of an annual pension + 3 times lump sum) need an annual pension on retirement of £47pa. Might seem a lit to most people, and it is. But an NHS Consultant on their top scale (so 20 odd years of Consultant service) would be on around £115kpa. On top of that there would have other pensionable income such as merit awards which can add another £10k. Based on 40 years service that would be an annual pension of £62.5k. and therefore almost £350k over the LTA. (62.5 x20 plus 3x lump sum) and therefore an excess tax charge of c£180k. Thats why it needed to be changed.
Even with rising interest rates, anyone on a DC scheme is not going to be able to provide a 62k pension on 1m pension pot.
Yet the risks are far higher for the DC contributor, so I don't have a lot of sympathy for DB schemes and certainly don't think they should get special treatment, particularly not those guaranteed by tax payers' money.
Totally agree about the risk angle.
The problem is that a DB member has no control over input or growth. An NHS member can not increase or reduce what they contribute, not can they select a highly adventurous or extremely cautious fund to increase / decrease the rate of growth in their pension. The problem around the AA is even more acute & increasing it to £60k should alleviate a lot of problems that I see around the excess tax charge this brings.
There really needs to be 2 sets of rules- one for DC schemes & one for DB schemes. You simply can not compare the amount a DC member can invest to how a DB scheme calculates the AA. Its chalk & cheese.
Can someone recommend a book/websites to understand pensions/ the stock market - just to a basic level? Would love to understand it a bit more and this chat goes completely over my head!
Friends, forget about crypto currencies as your speculative path to riches. I am here to tell you that the HSBC Global Money account can turn you into the (proper) currency trader you always fancied yourself as.
You need an HSBC current account, then you transfer wedge into the Global Money "partition", and then you can transfer freely between 14 currencies, at mid market rates, no fees, and its super-slick. Gives you 50 seconds to accept the exchange rate and bang, you are done.
Now the funny thing is, HSBC have not quite worked out why they are offering this account. I belatedly discovered that right now you can only pay GBP in, not foreign currencies. This won't bother most of you. However if you get regular wedge in, say, euros, maybe from renting out your little place on the French coast, you cannot send that money back in euros, to the euro sub-partition in your GM account, and then convert it back to GBP at the mid market rate. WTF? But they coyly say in their T&Cs, that this will be possible "in the future". Why don't they offer it now? Because, big banks... But you definitely can use it to trade currency in ways previously enjoyed only by pro traders. I have a funny feeling that when HSBC twig that mug punters are using it this way they will put a stop to it, as we mug punters are not allowed to do such things, are we? So get in and make hay while the sun shines...
I actually think this account is a deliberate strategy from HSBC to counter the various fintech payment and currency firms. A couple of years ago, I was selecting a new payment provider for a company that had 'offices' in over 70 countries. There were various fintech options (e.g. Adyen, who were in the same building as us and the respective company owners knew each other) but in the end we went for HSBC because it was cheap and easy.
It also provided a 'virtual' account in any country. I suspect that this functionality isn't yet available to retail customers, if you can't yet pay in Euros but suspect they are being honest when they say it's on its way.
That's also what I assumed when I saw it, and got very excited about it, as I use those firms and was literally on the point of junking HSBC and relying on them for foreign payments. However on MSE forums, as on here, there are some funny types, and one of them upbraided me for not recognising that its an account for Brits to travel with on their hols (but they might change it to something else in the future if I'm a good little boy and wait my turn). In vain I pointed out to him that HSBC boasts that you can move up to £50k per day, which sounds like quite a holiday .
But also as a result of my brush with these banking nerds ( I assume they are, in the same way that I'm a train nerd), I can warn everybody that HSBC also has a "Currency account" which you can open, in various countries. However if say, that account is in euros, when you want to transfer the euros back to your GB account, they will give you the "HSBC" rate, which is emphatically not the super mid-rate they offer on the new Global Money account.
Can someone recommend a book/websites to understand pensions/ the stock market - just to a basic level? Would love to understand it a bit more and this chat goes completely over my head!
I used to buy The Economist Guide to Financial Markets for people joining my team. From memory, I think it's pretty good for entry level.
Shaky opener for equity markets this morning, although they are recovering. I would like to point out that if we closed the competition right now the winner would be ...me :-) But of course the Fat Lady has not even thought about warming up yet...
The general mood across the FT articles this morning is that it should not be a re-run of 2008 because of the many improvements in the way big banks are regulated and run, however some cautious notes were sounded based around the less visible areas, such as private markets, and a more general worry about some banks having been caught out by the swift rise in interest rates. Gulp. I have also realised that money market funds are nowhere near as good as interest bearing savings accounts at banks (provided you stay within the guarantee limit).
So just for once, fortune favours the cautious. I just totted up, and found I have cash spread across 16 (!) different cash accounts in two countries, paying between 2.7% and 6%, then there is the hilarious Czech Republika bond which is based on RPI plus 0.5% for 6 years, so I think must be running at something like 15% right now. Unfortunately I've only got about £4k there since when I took it out nobody thought inflation was any kind of issue, even though it always stayed a little above 2% here which raised my suspicions.
But while I've been writing this, I believe I have lost the competition leadership. Oh, well, so long as its because of upward movement...
Anybody know the approx interest rate for a 50% LTV mortgage?
Depends whether you want fixed or tracker & over a specific time period (2,3,5 or 10 years). 2 year fixed are more expensive that 5 year fixed. 10 year fixed probably the cheapest. Did see the first sub 4% deal earlier (3.99%) so I would say for a 50% LTV you're probably looking at around 4.1%-4.2% for a 5 year fixed
I opened a Fidelity account in 2020 and have money in a handful of funds, within an ISA, I do not track/follow them, most have lost money in this time, all have once you allow for inflation (overall loss is 3.27% plus inflation). Best performing fund is Fidelity Index UK Fund P Accumulation in which I have apx 10% of my money, up 4.68% in this time (still well down in real terms). Fund I have most in is Fidelity Global Dividend Fund W-Accumulation (UK), about 30% of my money, down 2% (much more in real terms). Worst performing fund is IFSL Marlborough UK Micro-Cap Growth Fund P Acc in which I have apx 2.5% of my money, down 23.1% (much more in real terms).
Reluctant to put any more money in but it is coming up to ISA deadline so time to review, any recommendations for fund(s) to invest in ?
Comments
Am I also right in assuming that it is really only of benefit to those die before they are 75 as pots above LTA then receive a tax surcharge of 25% anyway.
I'm not sure how this is affected by the increase to £60k for the annual allowance - currently you lose £1 of the annual allowance for every £2 above the threshold so reducing it from £40k down to £10k if you are £60k above the threshold. Will it now still be £1 lost for every £2 over from £60k down to £10k thereby maximum reduction is at £100k over the threshold?
I don't know too many people with fixed protection as it limits you somewhat. I have a few clients with Individual Protection, mostly IP16. But their protection is not much off the current LTA - one was at £1.1m another closer to £1.2.
Noooooo.
Pensions have always been taxable. All that has been abolished is the upper limit where an excess tax charge kicks in.
The only"tax free" part to a pension is
1) it grows free of capital gains tax. Gordon Brown taxed dividends in his first Budget back in 1997.
2) it's free of Inheritance tax.
3) you can pass the fund onto you dependants tax free if you die before age 75. After 75 it will be taxed based on their notional tax rate
4) you can withdraw a % (for most people its 25%) tax free - the residual fund is taxable. You might be lucky that in retirement your pension income us so low that you aren't taxed on it - but seeing as the Personal Allowance has been frozen at £12500 and the State Pension for most people will be around £10k pa as from April - then even a small amount of pension income will soon be taxed.
So Mr BBC .....Pensions are not tax free.
Nobody gets tax relief on their NI contributions!!
The fact is that pensions tax relief is no
big deal. Say you put £1,000 into your pension and as a higher rate tax payer you deny the Government £400 of tax revenue. That £1,000 grows to £3,000 after investment returns are added. You then pay 40% income tax on the £3,000 as it is drawn down plus 40% tax on any additional investment return. (The 55% LTA charge is presumably HMRC’s equivalent to the income tax had it been paid as pension). So the £3,000 pension pot is worth at least £1,650 as far as HMRC is concerned. The tax free lump sum simply makes the situation more fair, rather than the generous giveaway it is portrayed as.
So why would any restrictions be put on pensions savings at all when they generate significant long term tax revenues out of all proportion to the initial tax relief given to encourage savings.
It's only really come to the fore because of the serious issues it was causing NHS Doctors and the effects that was having on staff numbers. Also, the way the excess tax on the Annual Allowance is calculated and charged is retrospective - you can't calculate it (for DB schemes) until after the tax year has finished & so you are faced with a tax bill 6-12 months after the event with no recourse to do anything about it. Apart from leaving the scheme !
I do think scrapping the LTA was a bit extreme & it would have been better changing how any excess is charged. Same goes for the LTA. I said on here a few weeks back that there should be 2 regimes for taxing pension excesses - one for DC scheme where you can control the amount going in and (to some extent) the growth and another for DB schemes where you have no control over either.
One final piece. The current LTA is around £1.1m. To reach that you would (in the traditional final salary scheme of an annual pension + 3 times lump sum) need an annual pension on retirement of £47pa. Might seem a lit to most people, and it is. But an NHS Consultant on their top scale (so 20 odd years of Consultant service) would be on around £115kpa. On top of that there would have other pensionable income such as merit awards which can add another £10k. Based on 40 years service that would be an annual pension of £62.5k. and therefore almost £350k over the LTA. (62.5 x20 plus 3x lump sum) and therefore an excess tax charge of c£180k. Thats why it needed to be changed.
There is absolutely no justification for capping final salary pensions where the employer has funded 90% of the cost. There is no tax "leakage" as the employer would have got the same tax relief as an expense whether paid as salary or pension. So what justification is there for taxing the recipient over and above normal income tax. HMRC had to invent something for DB schemes for no other reason than they couldn't be seen as just attacking money purchase schemes because it was convenient. The absurdity is obvious given the LTA valuation and tax payable on a final salary scheme is the same whether the pension is paid from age 55 or 70 and wether or not it has inflation proofing when clearly one pension could be at least twice the value of the other but bearing an identical tax. It is as non-sensical a tax levy as you could dream up
Now in one fell swoop all my advice & discussions are null & void.
You need an HSBC current account, then you transfer wedge into the Global Money "partition", and then you can transfer freely between 14 currencies, at mid market rates, no fees, and its super-slick. Gives you 50 seconds to accept the exchange rate and bang, you are done.
Now the funny thing is, HSBC have not quite worked out why they are offering this account. I belatedly discovered that right now you can only pay GBP in, not foreign currencies. This won't bother most of you. However if you get regular wedge in, say, euros, maybe from renting out your little place on the French coast, you cannot send that money back in euros, to the euro sub-partition in your GM account, and then convert it back to GBP at the mid market rate. WTF? But they coyly say in their T&Cs, that this will be possible "in the future". Why don't they offer it now? Because, big banks... But you definitely can use it to trade currency in ways previously enjoyed only by pro traders. I have a funny feeling that when HSBC twig that mug punters are using it this way they will put a stop to it, as we mug punters are not allowed to do such things, are we? So get in and make hay while the sun shines...
It also provided a 'virtual' account in any country. I suspect that this functionality isn't yet available to retail customers, if you can't yet pay in Euros but suspect they are being honest when they say it's on its way.
Yet the risks are far higher for the DC contributor, so I don't have a lot of sympathy for DB schemes and certainly don't think they should get special treatment, particularly not those guaranteed by tax payers' money.
The problem is that a DB member has no control over input or growth. An NHS member can not increase or reduce what they contribute, not can they select a highly adventurous or extremely cautious fund to increase / decrease the rate of growth in their pension. The problem around the AA is even more acute & increasing it to £60k should alleviate a lot of problems that I see around the excess tax charge this brings.
There really needs to be 2 sets of rules- one for DC schemes & one for DB schemes. You simply can not compare the amount a DC member can invest to how a DB scheme calculates the AA. Its chalk & cheese.
But also as a result of my brush with these banking nerds ( I assume they are, in the same way that I'm a train nerd), I can warn everybody that HSBC also has a "Currency account" which you can open, in various countries. However if say, that account is in euros, when you want to transfer the euros back to your GB account, they will give you the "HSBC" rate, which is emphatically not the super mid-rate they offer on the new Global Money account.
Pension rules is a whole different ball game.
The general mood across the FT articles this morning is that it should not be a re-run of 2008 because of the many improvements in the way big banks are regulated and run, however some cautious notes were sounded based around the less visible areas, such as private markets, and a more general worry about some banks having been caught out by the swift rise in interest rates. Gulp. I have also realised that money market funds are nowhere near as good as interest bearing savings accounts at banks (provided you stay within the guarantee limit).
So just for once, fortune favours the cautious. I just totted up, and found I have cash spread across 16 (!) different cash accounts in two countries, paying between 2.7% and 6%, then there is the hilarious Czech Republika bond which is based on RPI plus 0.5% for 6 years, so I think must be running at something like 15% right now. Unfortunately I've only got about £4k there since when I took it out nobody thought inflation was any kind of issue, even though it always stayed a little above 2% here which raised my suspicions.
But while I've been writing this, I believe I have lost the competition leadership. Oh, well, so long as its because of upward movement...
Best performing fund is Fidelity Index UK Fund P Accumulation in which I have apx 10% of my money, up 4.68% in this time (still well down in real terms).
Fund I have most in is Fidelity Global Dividend Fund W-Accumulation (UK), about 30% of my money, down 2% (much more in real terms).
Worst performing fund is IFSL Marlborough UK Micro-Cap Growth Fund P Acc in which I have apx 2.5% of my money, down 23.1% (much more in real terms).
Reluctant to put any more money in but it is coming up to ISA deadline so time to review, any recommendations for fund(s) to invest in ?