Reply to: Possible pension changes in the budget

[Fred Bloggs]

What government has lived within their revenue?

Governments don't.

You are, ofcourse, generally, quite correct. However since the economy was effectively bankrupted by Mr Brown, things have been much worse. It isn't impossible for governments to run a surplus and balance the budget across an economic cycle. It does however, require a much tighter control on policy than we have had for most ofthe post war period.

[SueEllen]

Unfortunately, the government's inability to live within it's revenue, means that everything is sacrificed to raise revenue. Sensible or not, it doesn't seem to matter any more.

What government has lived within their revenue?

Governments don't.

[Fred Bloggs]

seems mental that they would go after pensions

We are all living longer, getting more associated health and social issues which need paid for - government dont want to cough up for it, so they decide it's a good time to make it less attractive to save up your own way of paying for this stuff when your not working anymore?

Genius.

Next they will announce that people can draw their pension pots as a lump sum and blow it on what they like....... oh.

Unfortunately, the government's inability to live within it's revenue, means that everything is sacrificed to raise revenue. Sensible or not, it doesn't seem to matter any more.

[WordIsBond]

Interestingly that is exactly the same advice (or guidance) I keep getting from various wealth management companies, IFA's and even non-advisory brokers (like Hargreaves Lansdown or Fidelity).

Yeah. Just remember they have a vested interest in getting you to invest as much as money as they can (and start paying them fees as soon as possible).

We're in speculation territory here. No one except our beloved Chancer (that is the word I want, isn't it?) of the Exchequer knows what is going to happen. These people are all pushing the narrative that will encourage you to take actions which benefit them. That does not mean they are wrong, or even dishonest.

My view is that any change to tax relief on employer pension contributions is going to be a little bit complicated to implement. It may necessitate changes to payroll software, including their own Basic PAYE tools. It comes not long after they've forced Pension AE on employers, brought in their new apprentice tax, etc, etc. I do not think it is going to be done overnight. Big business will scream, because it not only costs employees, it will hit employers with yet another level of complication in their payroll, and to do it instantaneously will be intolerable.

We may see immediate changes to tax relief on personal contributions, but I doubt we see immediate changes to employer contributions. That would, I think, require one of two things. Either they have to give payroll software providers time to respond, or they have to throw everyone in the higher tax band whose company makes pension contributions into self-assessment to recover the tax. That would be very costly.

Unless you are staying within the basic rate band, it is unlikely to be harmful from a tax perspective to bring pension contributions forward to before the budget. If you were going to do it in late March or April anyway, why not before the budget, to be sure? But if someone wasn't going to make contributions, and cash flow or other reasons make it awkward to do so, I wouldn't be one to try to stampede people into acting now.

[Danglekt]

seems mental that they would go after pensions

We are all living longer, getting more associated health and social issues which need paid for - government dont want to cough up for it, so they decide it's a good time to make it less attractive to save up your own way of paying for this stuff when your not working anymore?

Genius.

Next they will announce that people can draw their pension pots as a lump sum and blow it on what they like....... oh.

[handyandy]

The likely changes to employers contributions is something I've been following in news/online articles etc. (taking a keen interest as it would affect me!!)

Some reports/rumours suggest that any changes to make employers contributions less attractive could take affect from budget day - to prevent people suddenly decided to top lots of cash into their pension pots before April 5th.

So anyone intent on topping up may want to get a shift on.

Interestingly that is exactly the same advice (or guidance) I keep getting from various wealth management companies, IFA's and even non-advisory brokers (like Hargreaves Lansdown or Fidelity).

[jpdw]

The likely changes to employers contributions is something I've been following in news/online articles etc. (taking a keen interest as it would affect me!!)

Some reports/rumours suggest that any changes to make employers contributions less attractive could take affect from budget day - to prevent people suddenly decided to top lots of cash into their pension pots before April 5th.

So anyone intent on topping up may want to get a shift on.

[DallasDad]

Where does NI come into the equation?
Any changes looming there which I appreciate may not be relevant to those of you outside of IR35 but what about those of you within or I guess where it gets even messier with some contracts in and and some out?

[WordIsBond]

Just one thing to note. If you are staying below the higher rate band (perhaps because your spouse is a shareholder), you might get HIGHER tax relief by waiting. One of the rumours is that pension relief will be set at a flat 25 or 30%. If so, higher rate payers will do worse but basic rate payers will do better.

[Smartie]

I don't see much incentive for him to change the tax on pension income to be honest. Maybe we'll get it taxed at the basic rate if we're very lucky.

People often forget that pensions aren't tax free, just tax deferred. Better if you're a higher earner while working then a basic rate payer in retirement.

Anyway, the main dilemma is how to split pension savings and dividend withdrawals (which could be ISA'd) before the budget/end of the tax year. Divs are definitely getting taxed more, pensions are very likely to lose some benefits.

Obviously that's down to personal circumstance such as age.

[Fred Bloggs]

One puzzle is that if it's taxed before it goes in, is it going to be taxed when you take it out? If so, you could end up worse off with your money in a pension.

Details yet to be released. One idea was to align SIPPs and ISAs so that money was taxed on the way in, but tax free on the way out. Problem is, governments often change theirmind and in the case of pensions very often too.

[mudskipper]

One puzzle is that if it's taxed before it goes in, is it going to be taxed when you take it out? If so, you could end up worse off with your money in a pension.

[mudskipper]

I would consider it prudent to maximise you SIPP contribution. Any change can only be for the worse in my olinion.

Agreed - I'm intending to top up a few K before April.

[Fred Bloggs]

I would consider it prudent to maximise you SIPP contribution. Any change can only be for the worse in my olinion.

[zoomfwd]

I can't see employers contributions in their current form being left untouched

How tax relief reform will affect pension schemes - Retirement Planner

Wilson believes employer contributions will also need to go through payroll under a single rate system to ensure the tax relief is applied at the correct rate and to make sure individuals can’t get around the rules by using salary sacrifice or getting employers to make additional contributions on their behalf.

Currently, all employer contributions get paid into the pension scheme on a gross basis – no matter whether the scheme uses a net pay or relief at source arrangement.

Pensions and Lifetime Savings Association head of policy and research Jackie Wells agrees. She says: “The way we think this will work in practice would be that all contributions will have to be paid into the pension scheme net of the individual’s marginal income tax rate, which means putting them through payroll.

“That has a number of implications – not least that payroll systems will have to be adjusted to take tax from the employer contribution as well as the employee contribution, something which has implications for both employers who operate net pay arrangements and relief at source.”