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Savings and Investments thread
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I was thinking the other day that the TFC element has been 25% for ever & a day. It does not line up with any tax relief or income tax level. Could it be reduced to say 20% ??0
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redman said:
What sort of transitional arrangements would you envisage? I'm struggling on this.Rob7Lee said:
if no transitional arrangements then yes, but I think the general comment is that transitional arrangements would be put into place. My only negative thought on that is it won't raise additional revenue for some years, something governments don't often to go for.redman said:
I'm not so sure. Wouldn't a future date mean millions suddenly being withdrawn from pension schemes? There must be many people who have left money in pension pots to protect from IHT whilst living off savings and DB schemes. Could the pension industry even suddenly cope?bobmunro said:meldrew66 said:As someone who has just sent off their NHS AW8 Retirement forms based on taking maximum cash from the pension on 31 March, I'm praying that any decision to reduce the cash figure to £100,000 is effective from the new financial year. It will be interesting to see what allowance they make (if any!) for people who have already started the retirement process before any reduced cash withdrawal entitlement comes into effect. Worst case scenario for me (and likely many others) is that the rules change immediately/on budget day which will leave all those who are in the process of retiring to need to, potentially, reverse the decision to avoid being hit with a massive financial penalty. Needless to say, I'm a bit worried at the moment.
I wouldn't worry too much - any changes to pensions (LTA, Tax-free amount, tax relief rates etc...) will almost certainly not take effect until April 2025, and even then there will be transitional arrangements.
Let's say they wanted to reduce the tax free element to £100k. They could say that anyone currently over 50, or anyone with a pension worth in excess of £500k can apply for protection (much like when the LTA came in) so that it doesn't apply to them. But that may come with restrictions, i.e. you can no longer pay in. Just a guess.1 -
Ok thanks, that would be fairly simple.0
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I think they are more likely to restrict by a monetary amount. Probably not too concerned with a person with £100k taking £25k but would with someone with £600k taking £150k tax free.golfaddick said:I was thinking the other day that the TFC element has been 25% for ever & a day. It does not line up with any tax relief or income tax level. Could it be reduced to say 20% ??0 -
What I find odd in the speculation in the press is that all these reasons for now not doing things like a flat rate of tax relief on pension contributions , implications of the Nom Don changes or varying the introduction VAT on school fees in some fashion etc are all known beforehand. They are not really stunning revelations or some complex modelling.The government and their advisors will have known these considerations previously.I think it’s all wild speculation designed to try and tease out some budget details ahead of time.The plan likely remains the same as it always was but we just don’t know what it is.0
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Thanks Terry.
Basically what she said to me, but some of the knowledgeable people on here have got me wearing brown trousers and I know whatever I do will be wrong.
I'm still sitting tight atm.1 -
The only downsides (I can see) of taking cash lump sum now is, 1. what to do with it as it'll no longer be in a tax free wrapper. 2. if they increased the amount you can take tax free other than for those who already have (2. to me seems highly unlikely). Have I missed something else?Covered End said:Thanks Terry.
Basically what she said to me, but some of the knowledgeable people on here have got me wearing brown trousers and I know whatever I do will be wrong.
I'm still sitting tight atm.0 -
But that’s the effect of a cap we already have. So lowering it is where that leads despite it being at the same level (£267k?) for a little while already.Rob7Lee said:
I think they are more likely to restrict by a monetary amount. Probably not too concerned with a person with £100k taking £25k but would with someone with £600k taking £150k tax free.golfaddick said:I was thinking the other day that the TFC element has been 25% for ever & a day. It does not line up with any tax relief or income tax level. Could it be reduced to say 20% ??Personally I think taking away these ‘benefits’ risk even more not saving enough in pensions and will be counterproductive.My guess now would be pension funds become subject to IHT but no other big changes if we assume this all about drip feeding speculation to manage the formal announcements on budget day.0 -
It's currently outside IHT in a SIPP.Rob7Lee said:
The only downsides (I can see) of taking cash lump sum now is, 1. what to do with it as it'll no longer be in a tax free wrapper. 2. if they increased the amount you can take tax free other than for those who already have (2. to me seems highly unlikely). Have I missed something else?Covered End said:Thanks Terry.
Basically what she said to me, but some of the knowledgeable people on here have got me wearing brown trousers and I know whatever I do will be wrong.
I'm still sitting tight atm.1 -
Ah yes, fingers crossed it stays that way.Covered End said:
It's currently outside IHT in a SIPP.Rob7Lee said:
The only downsides (I can see) of taking cash lump sum now is, 1. what to do with it as it'll no longer be in a tax free wrapper. 2. if they increased the amount you can take tax free other than for those who already have (2. to me seems highly unlikely). Have I missed something else?Covered End said:Thanks Terry.
Basically what she said to me, but some of the knowledgeable people on here have got me wearing brown trousers and I know whatever I do will be wrong.
I'm still sitting tight atm.1 - Sponsored links:
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I'm pretty sure thats one of the things that will happen. No reason not to. Why should pension funds be outside your Estate when nothing else is ? Even the home you live in is part of your Estate. So why not your pension ?Rob7Lee said:
Ah yes, fingers crossed it stays that way.Covered End said:
It's currently outside IHT in a SIPP.Rob7Lee said:
The only downsides (I can see) of taking cash lump sum now is, 1. what to do with it as it'll no longer be in a tax free wrapper. 2. if they increased the amount you can take tax free other than for those who already have (2. to me seems highly unlikely). Have I missed something else?Covered End said:Thanks Terry.
Basically what she said to me, but some of the knowledgeable people on here have got me wearing brown trousers and I know whatever I do will be wrong.
I'm still sitting tight atm.
Also it really only affects people in DC scheme so publuc sector workers are protected.1 -
I have a wizard wheeze for avoiding IHT - I'm going to spend it all!5
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I would have thought it would affect DB schemes too where the pension transfers to the spouse or children in the event of the pension holders death.golfaddick said:
I'm pretty sure thats one of the things that will happen. No reason not to. Why should pension funds be outside your Estate when nothing else is ? Even the home you live in is part of your Estate. So why not your pension ?Rob7Lee said:
Ah yes, fingers crossed it stays that way.Covered End said:
It's currently outside IHT in a SIPP.Rob7Lee said:
The only downsides (I can see) of taking cash lump sum now is, 1. what to do with it as it'll no longer be in a tax free wrapper. 2. if they increased the amount you can take tax free other than for those who already have (2. to me seems highly unlikely). Have I missed something else?Covered End said:Thanks Terry.
Basically what she said to me, but some of the knowledgeable people on here have got me wearing brown trousers and I know whatever I do will be wrong.
I'm still sitting tight atm.
Also it really only affects people in DC scheme so publuc sector workers are protected.0 -
But there is no "pot" to transfer. On death spouse and/or children get a continuing monthly payment.TelMc32 said:
I would have thought it would affect DB schemes too where the pension transfers to the spouse or children in the event of the pension holders death.golfaddick said:
I'm pretty sure thats one of the things that will happen. No reason not to. Why should pension funds be outside your Estate when nothing else is ? Even the home you live in is part of your Estate. So why not your pension ?Rob7Lee said:
Ah yes, fingers crossed it stays that way.Covered End said:
It's currently outside IHT in a SIPP.Rob7Lee said:
The only downsides (I can see) of taking cash lump sum now is, 1. what to do with it as it'll no longer be in a tax free wrapper. 2. if they increased the amount you can take tax free other than for those who already have (2. to me seems highly unlikely). Have I missed something else?Covered End said:Thanks Terry.
Basically what she said to me, but some of the knowledgeable people on here have got me wearing brown trousers and I know whatever I do will be wrong.
I'm still sitting tight atm.
Also it really only affects people in DC scheme so publuc sector workers are protected.0 -
Isn't that sort of the point. Just because you are in draw down it might become taxable, but buy an annuity with 100% spouse pension and all of a sudden it isn't (or with a DB the usual 50% spouse pension). Seems like different rules were that to be the case.golfaddick said:
But there is no "pot" to transfer. On death spouse and/or children get a continuing monthly payment.TelMc32 said:
I would have thought it would affect DB schemes too where the pension transfers to the spouse or children in the event of the pension holders death.golfaddick said:
I'm pretty sure thats one of the things that will happen. No reason not to. Why should pension funds be outside your Estate when nothing else is ? Even the home you live in is part of your Estate. So why not your pension ?Rob7Lee said:
Ah yes, fingers crossed it stays that way.Covered End said:
It's currently outside IHT in a SIPP.Rob7Lee said:
The only downsides (I can see) of taking cash lump sum now is, 1. what to do with it as it'll no longer be in a tax free wrapper. 2. if they increased the amount you can take tax free other than for those who already have (2. to me seems highly unlikely). Have I missed something else?Covered End said:Thanks Terry.
Basically what she said to me, but some of the knowledgeable people on here have got me wearing brown trousers and I know whatever I do will be wrong.
I'm still sitting tight atm.
Also it really only affects people in DC scheme so publuc sector workers are protected.2 -
Couple of things from a novice...
1. Would I be right to assume any CGT increase is likely to be delayed. Would make sense to me in that it encourages people to sell lots now and hence a big immediate jump in CGT receipts immediately.
2. IFA fees. Is 1% pa management fee reasonable?
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1. Historically tax changes like rates etc tend to happen at the start of the next tax year, as otherwise it's very difficult to manage mid year. So my assumption would be any change to CGT happens from 6th April 2025.Athletico Charlton said:Couple of things from a novice...
1. Would I be right to assume any CGT increase is likely to be delayed. Would make sense to me in that it encourages people to sell lots now and hence a big immediate jump in CGT receipts immediately.
2. IFA fees. Is 1% pa management fee reasonable?
Ta
2. Seems steep to me, but does depend on what they are doing for that and what they are managing (and more importantly the amount). If they are managing your SIPP with £25k in it then £250 probably doesn't cut it. It they are managing £1m in a SIPP then £10k sounds a bit steep. Most rebate to a degree for the larger sums.
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As @Rob7Lee says re CGT. The allowance is on a tax year to tax year basis so changing anything mid term would be very very messy.Athletico Charlton said:Couple of things from a novice...
1. Would I be right to assume any CGT increase is likely to be delayed. Would make sense to me in that it encourages people to sell lots now and hence a big immediate jump in CGT receipts immediately.
2. IFA fees. Is 1% pa management fee reasonable?
Ta
As for IFA fees. Some of us charge 0.5%pa and might discount it for large sums 😉.1 -
After working for almost 40 years, I took my work pension at 55, wife did the same a bit later on as I was always concerned that government would go after pots of money rightfully earned over time as an easy win. Never had a penny from the state but they would like to take as many penny's from me that they can get away with.
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I haven't heard anything specific - just the same that everyone has heard about an LTA-type cap at 100k. I would have thought it fairer to just reduce the amount you can put in per year but I think the original idea of putting the limits up was to move people from pensions to ISA savings.Fortune 82nd Minute said:
Interesting, Any rumours about anything affecting ISAs?WishIdStayedinthePub said:My sources in government are saying:
- reducing tax free lump sum, as it's easy and can be spun to only affect the 'rich'
- pensions brought within IHT - again, can be said to only affect the rich
- however, the flat rate idea is running into issues for the same reason as re-introducing the LTA: it will generate material tax bills for all those public employees in DB pensions who are being paid much more than 50k/year; so probably needs more work
- therefore maybe instead removing employers' NI from tax deduction on pensions (as it's immediate and the government can pick up the bill for its own employees )
- kicking VAT on private school fees down the road a bit, as they've just worked out it will cost billions (the OBR has said the transfer into the state sector will be net negative on its own and now they've realised that the rich schools will be able to go back ten years to claim back VAT on investments)
How, then, to bridge the gap:
- they're back to PFI 2.0, so will try to borrow a lot more but keep it off balance sheet by saying it's investment in infra (therefore saying it is asset/liability neutral)
- working assumption of 10% budget cuts to many departments, which will be presented/solved as productivity improvements in government spending and by attacking suppliers who deliver poor value
Note, these are rumours. These sources don't know all this, but they are one below perm sec level, so they hear things.
As for the timing, I'm taking no chances and have requested the full lump sum to pay off the mortgage and re-invest what I don't need for that.
Other impacts of the budget - friends and business contacts are: making redundancies now, while they still can; selling businesses to avoid capital gains; not buying businesses or making investments due to potential changes in capital gains tax and employment laws; actively looking to move abroad. That might all quieten down after 30th October, if it's not as bad as feared.0 - Sponsored links:
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I agree with the logic but look at all the other decisions that clearly wouldn't work (ie raise money), like VAT on school fees, non-docs and the private equity carry trade.TelMc32 said:
I messaged her as well. For those interested, this was the responseCovered End said:I e mailed my IFA re my SIPP tax free lump sum before I transferred it out.
She was extremely confident that any possible reduction in the tax free lump sum would not be with immediate effect.
I can no longer find the e mail, but she was pretty convincing.
Anyway, I’m keeping my fingers crossed that she is correct.
“We have spoken with the Abrdn technical area, and I’ve set out some commentary we received back from the Pensions Technical Manager there, and her comments are very interesting. I think they provide some reassurance that the general feel from industry is they are unlikely to attack Tax Free Cash, but obviously no one knows for certain:
The sunset clause within Lifetime Allowance legislation, grants any Government the power to change any or all the regulations relating to the lifetime allowance abolition, without the need to consult or go through normal parliamentary process. The intent was, as we understand it, to allow for future changes in the annual allowance (possibly both up and down) and in the new allowances (the inference being for them to increase) but the wording is wide enough that it covers everything contained in the 2023 and 2024 Finance Acts and associated SIs that relate to LTA abolition. Therefore technically they could choose to reduce the LSA (also known as Tax Free Cash) if they wished as that forms part of these.
However, to make such a change overnight without any consultation or transitional rules would be if you excuse my expression 'political suicide'. Looking back at all the big pension changes made over the past 20+ years, the Government of the day has acknowledged that individuals have made payments in good faith based on the rule in force at the time and, where a change has reduced a benefit, they have introduced transitional rules to protect most of those. There have been some occasions where anti-forestalling was introduced such as the introduction of tapering which prevented post 8 July salary sacrifice from being used to meet the threshold requirement, but these have been aimed at high earners/company owners and didn’t impact on the average pension scheme member.
To simply reduce the LSA to say £100K as has been mooted without any form of transitional rights for those who have built up beyond would impact individuals much lower down the pension value chain – many people do still use their TFC to help pay off their mortgage and will have been contributing over the years with that aim in mind. Also it will change peoples’ behaviour and drive more to potentially opt out at a much earlier stage in their career which will affect the amount of pension money available to invest in productive finance and could push more people onto the State in later life once their much smaller pension pot has been exhausted – these are the behaviours Labour don’t want with their key focus on unlocking pension investment and encouraging people to be self-reliant.
We do still anticipate that the LSA will simply not be increased in the future even where the LSDBA is increased. And we do still expect Labour to make any changes in full consultation with the industry giving advisers and clients time to review and amend their strategy.”
Hope that’s of interest to those looking at what to do with their pensions/cash free lump sums.
It's outrageous that people are being left guessing about decisions that have been made over decades. But the chancellor hasn't come out and closed anything down - no doubt because she's already boxed herself in on so many other things to get over the line in the election. The pension and asset managers have been making a lot of noise and have told her how much is being drawn out, so presumably it was being considered seriously at some point; maybe she's backed off.
There's a lot more talk recently about borrowing and the civil service fears of cuts have been rising, presumably in an attempt to square the circle. So, maybe tax rises are being watered down a bit.
For me, cashing in is a decision that works in my personal circumstances. There's no downside doing it but quite a bit of downside risk if I don't.
I get rid of a loan at 5.5%, so can just trade for the equivalent investments in my pension that have a similar, low return, low risk profile. The rest I can put in other wrappers (ISAs over a couple of years or even VCTs, which have been protected for the next ten years).
It reduces my monthly out-goings by a significant amount, which has allowed me to turn down corporate jobs that were driving me nuts and look at lower cash/higher equity opportunities. I can still contribute to my and my wife's pension as before, as MPAA rules don't kick in if I just take the lump sum. Ironically, that includes the potential to take an index-linked DB pension from the civil service ....
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A total cap to me seems illogical in that it goes the other way to pensions, where there is is no LTA but annual allowance. It also would presumably need some fairly complicated transitional arrangements as there will be many people who have more than £100k in ISA's. They can have been built up since 1990's (originally as PEP's)WishIdStayedinthePub said:
I haven't heard anything specific - just the same that everyone has heard about an LTA-type cap at 100k. I would have thought it fairer to just reduce the amount you can put in per year but I think the original idea of putting the limits up was to move people from pensions to ISA savings.Fortune 82nd Minute said:
Interesting, Any rumours about anything affecting ISAs?WishIdStayedinthePub said:My sources in government are saying:
- reducing tax free lump sum, as it's easy and can be spun to only affect the 'rich'
- pensions brought within IHT - again, can be said to only affect the rich
- however, the flat rate idea is running into issues for the same reason as re-introducing the LTA: it will generate material tax bills for all those public employees in DB pensions who are being paid much more than 50k/year; so probably needs more work
- therefore maybe instead removing employers' NI from tax deduction on pensions (as it's immediate and the government can pick up the bill for its own employees )
- kicking VAT on private school fees down the road a bit, as they've just worked out it will cost billions (the OBR has said the transfer into the state sector will be net negative on its own and now they've realised that the rich schools will be able to go back ten years to claim back VAT on investments)
How, then, to bridge the gap:
- they're back to PFI 2.0, so will try to borrow a lot more but keep it off balance sheet by saying it's investment in infra (therefore saying it is asset/liability neutral)
- working assumption of 10% budget cuts to many departments, which will be presented/solved as productivity improvements in government spending and by attacking suppliers who deliver poor value
Note, these are rumours. These sources don't know all this, but they are one below perm sec level, so they hear things.
As for the timing, I'm taking no chances and have requested the full lump sum to pay off the mortgage and re-invest what I don't need for that.
Other impacts of the budget - friends and business contacts are: making redundancies now, while they still can; selling businesses to avoid capital gains; not buying businesses or making investments due to potential changes in capital gains tax and employment laws; actively looking to move abroad. That might all quieten down after 30th October, if it's not as bad as feared.0 -
I guess they would introduce it the way they did with LTAs - anyone above the limit would get a bye and it would only affect all the poor sods that haven't yet reached it - yet another transfer of wealth from the young to the old.redman said:
A total cap to me seems illogical in that it goes the other way to pensions, where there is is no LTA but annual allowance. It also would presumably need some fairly complicated transitional arrangements as there will be many people who have more than £100k in ISA's. They can have been built up since 1990's (originally as PEP's)WishIdStayedinthePub said:
I haven't heard anything specific - just the same that everyone has heard about an LTA-type cap at 100k. I would have thought it fairer to just reduce the amount you can put in per year but I think the original idea of putting the limits up was to move people from pensions to ISA savings.Fortune 82nd Minute said:
Interesting, Any rumours about anything affecting ISAs?WishIdStayedinthePub said:My sources in government are saying:
- reducing tax free lump sum, as it's easy and can be spun to only affect the 'rich'
- pensions brought within IHT - again, can be said to only affect the rich
- however, the flat rate idea is running into issues for the same reason as re-introducing the LTA: it will generate material tax bills for all those public employees in DB pensions who are being paid much more than 50k/year; so probably needs more work
- therefore maybe instead removing employers' NI from tax deduction on pensions (as it's immediate and the government can pick up the bill for its own employees )
- kicking VAT on private school fees down the road a bit, as they've just worked out it will cost billions (the OBR has said the transfer into the state sector will be net negative on its own and now they've realised that the rich schools will be able to go back ten years to claim back VAT on investments)
How, then, to bridge the gap:
- they're back to PFI 2.0, so will try to borrow a lot more but keep it off balance sheet by saying it's investment in infra (therefore saying it is asset/liability neutral)
- working assumption of 10% budget cuts to many departments, which will be presented/solved as productivity improvements in government spending and by attacking suppliers who deliver poor value
Note, these are rumours. These sources don't know all this, but they are one below perm sec level, so they hear things.
As for the timing, I'm taking no chances and have requested the full lump sum to pay off the mortgage and re-invest what I don't need for that.
Other impacts of the budget - friends and business contacts are: making redundancies now, while they still can; selling businesses to avoid capital gains; not buying businesses or making investments due to potential changes in capital gains tax and employment laws; actively looking to move abroad. That might all quieten down after 30th October, if it's not as bad as feared.
It is illogical - but then so were the LTAs, which were in place for many years and only very recently removed. They punished people who had invested well at higher risk. It was only because it also affected government employees on very lucrative DB schemes that they were done away with at all (and why no-one is hearing that they're coming back).
We need some stability in savings incentives. Gordon Brown broke the seal when he taxed dividends in pensions and chancellors have been milking us ever since. Last I saw that dividend move alone has skimmed 268 billion from pensions over 20 years and chancellors saw that he pretty much got away with it, politically.4 -
On a different topic, but one we have discussed before...Revolut. BBC Panorama has taken a look at it. Anyone else seen it, what do you think? Looked pretty watertight -and worrying - to me- but Panorama isn't what it was, so maybe some of you closer to the sector have some insights.
https://www.bbc.co.uk/iplayer/episode/m00226h0/panorama-britains-newest-bank-how-safe-is-your-money
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I can only comment on people I know who have worked at Revolut. Horrible toxic culture that values delivery no matter the cost.PragueAddick said:On a different topic, but one we have discussed before...Revolut. BBC Panorama has taken a look at it. Anyone else seen it, what do you think? Looked pretty watertight -and worrying - to me- but Panorama isn't what it was, so maybe some of you closer to the sector have some insights.
https://www.bbc.co.uk/iplayer/episode/m00226h0/panorama-britains-newest-bank-how-safe-is-your-moneyOne contact burnt out, another left after 2 years as they could not bear the constant demands and on their time.2 -
Lot of scams involving Revolute apparently BBC had an article 3 days ago where somebody lost £165k in an hour !!!!
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There were problems detecting money laundering about 5 years ago:PragueAddick said:On a different topic, but one we have discussed before...Revolut. BBC Panorama has taken a look at it. Anyone else seen it, what do you think? Looked pretty watertight -and worrying - to me- but Panorama isn't what it was, so maybe some of you closer to the sector have some insights.
https://www.bbc.co.uk/iplayer/episode/m00226h0/panorama-britains-newest-bank-how-safe-is-your-money
https://www.telegraph.co.uk/technology/2019/02/28/revolut-failed-block-suspicious-transactions/
And more recently, fines and staff issues:
https://amp.theguardian.com/business/2023/feb/20/revolut-can-the-chancellors-fintech-favourite-fix-its-image-problem
It's one of the reasons I've stuck with Monzo.1 -
Didn't I read that they haven't got a full banking licence ?red10 said:Lot of scams involving Revolute apparently BBC had an article 3 days ago where somebody lost £165k in an hour !!!!1 -
I don’t knowgolfaddick said:
Didn't I read that they haven't got a full banking licence ?red10 said:Lot of scams involving Revolute apparently BBC had an article 3 days ago where somebody lost £165k in an hour !!!!3 -
I wouldn't touch revolut with a bargepole and have said this to people for years since auditors first delayed, and then put so many stipulations in the signoff of the accounts it was staggering.
It all reminded me of the Wirecard scandal which was basically very very dodgy (illegal) balance sheet accounting to inflate revenue by falsely reporting purchases values and therefore asset values of subsidiaries.
They finally got their banking licence a few months ago, after a lot of delay.2
