Reply to: Warchest in pension fund and withdraw immediately at 55

[ASB]

I suspect employer contributions could become subject to employers NIC's. Probably an outside chance, but I think it could happen. That would hit people who salary sacrifice into their pensions hard too.

It will hurt some. But in general it is more likely to hurt the employer. Though it depends on the scheme of course and whether the employer splits the NI savinmg (mine doesn't but I do at least save the little bit of EEs NI).

[WordIsBond]

I suspect employer contributions could become subject to employers NIC's. Probably an outside chance, but I think it could happen. That would hit people who salary sacrifice into their pensions hard too.

Yes, he could do this as well. But this likely will not be done overnight, either, because payroll software would have to change. There may not be much notice on it, he could even bring a change like that in from April, but I can't imagine it takes effect on budget day. And I really doubt he does this. He's not totally stupid and he doesn't want to kill pension savings entirely.

Always, leading up to budget day, there are a lot of rumours of what they'll do. Usually, the reality isn't close to as bad as the rumours. Probably something is going to be done to hit tax relief on pensions. Less likely is that it is done with immediate effect. Probably it won't be half as bad as the rumours. They let all these rumours get started so that when they do something bad, everyone is relieved that it isn't as bad as they feared.

I'm expecting pension tax relief to be a flat rate, 25-30%. Corporate pension contributions will have to be processed through payroll (reducing tax for basic rate taxpayers, increasing it for higher rate taxpayers). It will probably be brought in effective 2017-2018. And if he hits the tax free lump sum, he won't hit it for past pension contributions, only for future ones (that could take immediate effect). I don't think this second one is happening, though. I think it is an ex-minister who wants to feel important so is talking up a scare story. Somebody fed it to him so we'd all be scared before the budget and happy afterwards that it didn't happen.

[Fred Bloggs]

I suspect employer contributions could become subject to employers NIC's. Probably an outside chance, but I think it could happen. That would hit people who salary sacrifice into their pensions hard too.

[WordIsBond]

My advice would be if you're over 55 put as much as you can into your SIPP and draw out the 25% while you still can. This chancellor is a real tight ba5tard.

And if you do this the recycling rules kick in, which for many people means if the tax free lump sum isn't taken away you've just done yourself a lot of harm.

The likelihood of taking away the lump sum for historical contributions is very, very low. To change the rules when people have invested for years under that expectation would infuriate millions of people. More likely, if he is going to target the lump sum, is that you can't do it for funds invested going forward.

And while I've said, and stand by, that it is very unlikely he'll restrict company contributions as of budget day, he certainly could take away the tax free lump sum for any contributions made from budget day forward.

Nothing could be better designed to discourage people from saving for retirement.

[Fred Bloggs]

My advice would be if you're over 55 put as much as you can into your SIPP and draw out the 25% while you still can. This chancellor is a real tight ba5tard.

[mackenzie99d]

The tax free lump sum might be going!

£4bn raid on pension savings likely, says former Osborne adviser | Money | The Guardian

[mudskipper]

Oh dear (tm)

[mudskipper]

I'm planning to do my annual pension top-up some time prior to the 16th March budget, to ensure I make the most of the 40k allowance and the tax allowance against it

Also be aware of the pension input period as I thought it was tax year based and it will be soon, however, I got a statement last year saying I had overpaid 10k, because the pension input period was July to July. Luckily it could be allocated into a previous year.

Just googled that

https://www.gov.uk/government/public...nual-allowance

I was aware there was a change that would allow people to make an extra payment this year (useful if you're trying to max it out), but hadn't looked into the detail of it.

[DallasDad]

check out the rules on pension lump sum recycling.

That is the term I was thinking of when reading the original post.

I am over 55 already and I am concious I could get caught by the above if I paid a lot in over the next few years and then found work was drying up, at that time taking 25% would be very attractive.

[ASB]

I think what you propose is sound, but for piece of mind, check out the rules on pension lump sum recycling.

As ever fred nails it.

it is common pension planning; search around "immediate vestment".

Recycleng is an issue; but decent size pension pot and decent size personal assets =|make contribution and replenish from lastmp sum is a viable strategy in many cases. It does of course mean 75% of those assets get tied up in the pension since the lump has been used and these will therefore be generating taxable income in some form at some point.

I am mulling tover something similer. To take the lump sum now and pay off what remains of the btl debt and leave the rest for pension income later.

the sums seem to get fairly complicated though.

[Scrag Meister]

I'm planning to do my annual pension top-up some time prior to the 16th March budget, to ensure I make the most of the 40k allowance and the tax allowance against it

Also be aware of the pension input period as I thought it was tax year based and it will be soon, however, I got a statement last year saying I had overpaid 10k, because the pension input period was July to July. Luckily it could be allocated into a previous year.

[WordIsBond]

I think fears about the age at which you can access your pension being raised are unfounded, especially if you make the contribution a year or two before retirement.

So says someone with a fixed state pension age of 65.....

I concur with syrio here. They are not going to change the age at which someone can retire a year or two before they hit that age. These changes are always going to be made / announced 5-10 years before they take effect, so that people can plan accordingly. No government would tell someone planning to retire next year that all of a sudden they can't do so because the retirement age has been changed with immediate effect. That's guaranteed loss of power at the next election.

[Contreras]

[url=http://www.hmrc.gov.uk/tools/pension-allowance/]Technically you can put in more than £40k, but it will cost you!

It's effectively up to £80k for this current tax year (depending upon circumstances) ...

http://www.hl.co.uk/news/articles/extra-pension-tax-relief-available-now

[SueEllen]

Yes I believe it should be possible and also a good idea. Maximize your pension contributions immediately before retirement to avoid corporation tax and then take it out as your 25% tax free lump sum.

Be aware that further changes to the pension rules are expected soon, probably in the next budget. You may find that the contribution limit is reduced.

I think fears about the age at which you can access your pension being raised are unfounded, especially if you make the contribution a year or two before retirement.

So says someone with a fixed state pension age of 65.....

[syrio]

Yes I believe it should be possible and also a good idea. Maximize your pension contributions immediately before retirement to avoid corporation tax and then take it out as your 25% tax free lump sum.

Be aware that further changes to the pension rules are expected soon, probably in the next budget. You may find that the contribution limit is reduced.

I think fears about the age at which you can access your pension being raised are unfounded, especially if you make the contribution a year or two before retirement.