I took my 25% tax free cash from my SIPP last year and am very pleased I did. If Labour stay in government they will most likely be coming for it sooner or later. I voted Labour but it could be a very expensive vote.
It's one of the few times I wish I was a couple of years older, still 2 years 3 months and 15 days until I can get my tax free lump sum out!!
So I have an old final salary pension as well as my current work pension. I was in it for 13 years, I’m 57 so could take this but was hanging on until I’m 60. Would it be a good idea to take this now & guarantee my 25% lump sum , what with all the uncertainties ?!
You could do. What is the normal retirement age for the scheme ? I'd expect there to be penalties/actuarial reductions if you took it early. If the retirement age was 60 then you might only lose 10-12% of the lump sum. If it was 65 it might not be worth it.
Always good to get an annual statement of its current value & options to take it early.
A simple point, but a very crucial one. Whilst I could retire at 55 and take my pension, my old DB scheme had a built in retirement age of 60. They would have reduced my annual pension by 20% (4% for every year to 60) if I had stayed in the scheme and it was another key reason for me opting to move the full pension to a SIPP and take a flexible drawdown.
Yes, I moved the full pension to a SIPP and then withdrew the full 25% tax free lump sum when Rachel Reeves started hinting about a cash grab.
I took my 25% tax free cash from my SIPP last year and am very pleased I did. If Labour stay in government they will most likely be coming for it sooner or later. I voted Labour but it could be a very expensive vote.
It's one of the few times I wish I was a couple of years older, still 2 years 3 months and 15 days until I can get my tax free lump sum out!!
So I have an old final salary pension as well as my current work pension. I was in it for 13 years, I’m 57 so could take this but was hanging on until I’m 60. Would it be a good idea to take this now & guarantee my 25% lump sum , what with all the uncertainties ?!
You could do. What is the normal retirement age for the scheme ? I'd expect there to be penalties/actuarial reductions if you took it early. If the retirement age was 60 then you might only lose 10-12% of the lump sum. If it was 65 it might not be worth it.
Always good to get an annual statement of its current value & options to take it early.
A simple point, but a very crucial one. Whilst I could retire at 55 and take my pension, my old DB scheme had a built in retirement age of 60. They would have reduced my annual pension by 20% (4% for every year to 60) if I had stayed in the scheme and it was another key reason for me opting to move the full pension to a SIPP and take a flexible drawdown.
Yes, I moved the full pension to a SIPP and then withdrew the full 25% tax free lump sum when Rachel Reeves started hinting about a cash grab.
May well come back and bite me on the ar$e, but I’m relatively relaxed about this at the moment. Struggling to see how they could penalise people who have retired and essentially put in a 20/30 year plan to manage their pensions, which is what successive governments have wanted. Potentially, I could see some changes to the rules going forward with pensions not yet taken.
I took my 25% tax free cash from my SIPP last year and am very pleased I did. If Labour stay in government they will most likely be coming for it sooner or later. I voted Labour but it could be a very expensive vote.
It's one of the few times I wish I was a couple of years older, still 2 years 3 months and 15 days until I can get my tax free lump sum out!!
So I have an old final salary pension as well as my current work pension. I was in it for 13 years, I’m 57 so could take this but was hanging on until I’m 60. Would it be a good idea to take this now & guarantee my 25% lump sum , what with all the uncertainties ?!
You could do. What is the normal retirement age for the scheme ? I'd expect there to be penalties/actuarial reductions if you took it early. If the retirement age was 60 then you might only lose 10-12% of the lump sum. If it was 65 it might not be worth it.
Always good to get an annual statement of its current value & options to take it early.
A simple point, but a very crucial one. Whilst I could retire at 55 and take my pension, my old DB scheme had a built in retirement age of 60. They would have reduced my annual pension by 20% (4% for every year to 60) if I had stayed in the scheme and it was another key reason for me opting to move the full pension to a SIPP and take a flexible drawdown.
Yes, I moved the full pension to a SIPP and then withdrew the full 25% tax free lump sum when Rachel Reeves started hinting about a cash grab.
May well come back and bite me on the ar$e, but I’m relatively relaxed about this at the moment. Struggling to see how they could penalise people who have retired and essentially put in a 20/30 year plan to manage their pensions, which is what successive governments have wanted. Potentially, I could see some changes to the rules going forward with pensions not yet taken.
I admire your bravery!! It used to be higher, 25% with no limit wasn’t it?
I took my 25% tax free cash from my SIPP last year and am very pleased I did. If Labour stay in government they will most likely be coming for it sooner or later. I voted Labour but it could be a very expensive vote.
It's one of the few times I wish I was a couple of years older, still 2 years 3 months and 15 days until I can get my tax free lump sum out!!
So I have an old final salary pension as well as my current work pension. I was in it for 13 years, I’m 57 so could take this but was hanging on until I’m 60. Would it be a good idea to take this now & guarantee my 25% lump sum , what with all the uncertainties ?!
You could do. What is the normal retirement age for the scheme ? I'd expect there to be penalties/actuarial reductions if you took it early. If the retirement age was 60 then you might only lose 10-12% of the lump sum. If it was 65 it might not be worth it.
Always good to get an annual statement of its current value & options to take it early.
A simple point, but a very crucial one. Whilst I could retire at 55 and take my pension, my old DB scheme had a built in retirement age of 60. They would have reduced my annual pension by 20% (4% for every year to 60) if I had stayed in the scheme and it was another key reason for me opting to move the full pension to a SIPP and take a flexible drawdown.
Yes, I moved the full pension to a SIPP and then withdrew the full 25% tax free lump sum when Rachel Reeves started hinting about a cash grab.
May well come back and bite me on the ar$e, but I’m relatively relaxed about this at the moment. Struggling to see how they could penalise people who have retired and essentially put in a 20/30 year plan to manage their pensions, which is what successive governments have wanted. Potentially, I could see some changes to the rules going forward with pensions not yet taken.
I admire your bravery!! It used to be higher, 25% with no limit wasn’t it?
Yes. But I think the real question is how soon could such changes be enacted?
Is it possible to do immediately at the budget or from the next tax year for example!? Presumably the pension industry need some notice to change / amend systems and processes. Maybe I’m being too optimistic but I recall from my own career white/green papers etc before new legislation announced at a budget get enacted?
We used to anticipate project spend to follow up on budget items.
I may be too optimistic as I haven’t taken my full tax free sum yet. 😉
Both of us took pensions and lump sums as soon as we could so they couldn't be grabbed. Lost some pension income as a result but not enough to affect our decisions. Always thought government would go after pension pots at some point.
I took my 25% tax free cash from my SIPP last year and am very pleased I did. If Labour stay in government they will most likely be coming for it sooner or later. I voted Labour but it could be a very expensive vote.
It's one of the few times I wish I was a couple of years older, still 2 years 3 months and 15 days until I can get my tax free lump sum out!!
So I have an old final salary pension as well as my current work pension. I was in it for 13 years, I’m 57 so could take this but was hanging on until I’m 60. Would it be a good idea to take this now & guarantee my 25% lump sum , what with all the uncertainties ?!
You could do. What is the normal retirement age for the scheme ? I'd expect there to be penalties/actuarial reductions if you took it early. If the retirement age was 60 then you might only lose 10-12% of the lump sum. If it was 65 it might not be worth it.
Always good to get an annual statement of its current value & options to take it early.
A simple point, but a very crucial one. Whilst I could retire at 55 and take my pension, my old DB scheme had a built in retirement age of 60. They would have reduced my annual pension by 20% (4% for every year to 60) if I had stayed in the scheme and it was another key reason for me opting to move the full pension to a SIPP and take a flexible drawdown.
Yes, I moved the full pension to a SIPP and then withdrew the full 25% tax free lump sum when Rachel Reeves started hinting about a cash grab.
And then what did you do with the 25% TFC ?? Dont tell me it's in deposit account or PB's !
I took my 25% tax free cash from my SIPP last year and am very pleased I did. If Labour stay in government they will most likely be coming for it sooner or later. I voted Labour but it could be a very expensive vote.
It's one of the few times I wish I was a couple of years older, still 2 years 3 months and 15 days until I can get my tax free lump sum out!!
So I have an old final salary pension as well as my current work pension. I was in it for 13 years, I’m 57 so could take this but was hanging on until I’m 60. Would it be a good idea to take this now & guarantee my 25% lump sum , what with all the uncertainties ?!
You could do. What is the normal retirement age for the scheme ? I'd expect there to be penalties/actuarial reductions if you took it early. If the retirement age was 60 then you might only lose 10-12% of the lump sum. If it was 65 it might not be worth it.
Always good to get an annual statement of its current value & options to take it early.
A simple point, but a very crucial one. Whilst I could retire at 55 and take my pension, my old DB scheme had a built in retirement age of 60. They would have reduced my annual pension by 20% (4% for every year to 60) if I had stayed in the scheme and it was another key reason for me opting to move the full pension to a SIPP and take a flexible drawdown.
Yes, I moved the full pension to a SIPP and then withdrew the full 25% tax free lump sum when Rachel Reeves started hinting about a cash grab.
May well come back and bite me on the ar$e, but I’m relatively relaxed about this at the moment. Struggling to see how they could penalise people who have retired and essentially put in a 20/30 year plan to manage their pensions, which is what successive governments have wanted. Potentially, I could see some changes to the rules going forward with pensions not yet taken.
I admire your bravery!! It used to be higher, 25% with no limit wasn’t it?
Yes. But I think the real question is how soon could such changes be enacted?
Is it possible to do immediately at the budget or from the next tax year for example!? Presumably the pension industry need some notice to change / amend systems and processes. Maybe I’m being too optimistic but I recall from my own career white/green papers etc before new legislation announced at a budget get enacted?
We used to anticipate project spend to follow up on budget items.
I may be too optimistic as I haven’t taken my full tax free sum yet. 😉
It certainly wouldn't be immediately and most likely from the next tax year.....so April 2026. The IHT change doesn't come into effect until 2027 so you might have a similar time frame.
And remember, when the LTA was reduced (from £2m to £1.5m and then to £1.25m) protections were put into place so that those already at those levels wouldn't be affected.
I took my 25% tax free cash from my SIPP last year and am very pleased I did. If Labour stay in government they will most likely be coming for it sooner or later. I voted Labour but it could be a very expensive vote.
It's one of the few times I wish I was a couple of years older, still 2 years 3 months and 15 days until I can get my tax free lump sum out!!
So I have an old final salary pension as well as my current work pension. I was in it for 13 years, I’m 57 so could take this but was hanging on until I’m 60. Would it be a good idea to take this now & guarantee my 25% lump sum , what with all the uncertainties ?!
You could do. What is the normal retirement age for the scheme ? I'd expect there to be penalties/actuarial reductions if you took it early. If the retirement age was 60 then you might only lose 10-12% of the lump sum. If it was 65 it might not be worth it.
Always good to get an annual statement of its current value & options to take it early.
A simple point, but a very crucial one. Whilst I could retire at 55 and take my pension, my old DB scheme had a built in retirement age of 60. They would have reduced my annual pension by 20% (4% for every year to 60) if I had stayed in the scheme and it was another key reason for me opting to move the full pension to a SIPP and take a flexible drawdown.
Yes, I moved the full pension to a SIPP and then withdrew the full 25% tax free lump sum when Rachel Reeves started hinting about a cash grab.
And then what did you do with the 25% TFC ?? Dont tell me it's in deposit account or PB's !
S&S ISA's for me & wife over 2 tax years, some on deposit with top paying gross interest, paying for an expensive wedding.
I took my 25% tax free cash from my SIPP last year and am very pleased I did. If Labour stay in government they will most likely be coming for it sooner or later. I voted Labour but it could be a very expensive vote.
It's one of the few times I wish I was a couple of years older, still 2 years 3 months and 15 days until I can get my tax free lump sum out!!
So I have an old final salary pension as well as my current work pension. I was in it for 13 years, I’m 57 so could take this but was hanging on until I’m 60. Would it be a good idea to take this now & guarantee my 25% lump sum , what with all the uncertainties ?!
You could do. What is the normal retirement age for the scheme ? I'd expect there to be penalties/actuarial reductions if you took it early. If the retirement age was 60 then you might only lose 10-12% of the lump sum. If it was 65 it might not be worth it.
Always good to get an annual statement of its current value & options to take it early.
A simple point, but a very crucial one. Whilst I could retire at 55 and take my pension, my old DB scheme had a built in retirement age of 60. They would have reduced my annual pension by 20% (4% for every year to 60) if I had stayed in the scheme and it was another key reason for me opting to move the full pension to a SIPP and take a flexible drawdown.
Yes, I moved the full pension to a SIPP and then withdrew the full 25% tax free lump sum when Rachel Reeves started hinting about a cash grab.
May well come back and bite me on the ar$e, but I’m relatively relaxed about this at the moment. Struggling to see how they could penalise people who have retired and essentially put in a 20/30 year plan to manage their pensions, which is what successive governments have wanted. Potentially, I could see some changes to the rules going forward with pensions not yet taken.
I admire your bravery!! It used to be higher, 25% with no limit wasn’t it?
Yes. But I think the real question is how soon could such changes be enacted?
Is it possible to do immediately at the budget or from the next tax year for example!? Presumably the pension industry need some notice to change / amend systems and processes. Maybe I’m being too optimistic but I recall from my own career white/green papers etc before new legislation announced at a budget get enacted?
We used to anticipate project spend to follow up on budget items.
I may be too optimistic as I haven’t taken my full tax free sum yet. 😉
It certainly wouldn't be immediately and most likely from the next tax year.....so April 2026. The IHT change doesn't come into effect until 2027 so you might have a similar time frame.
And remember, when the LTA was reduced (from £2m to £1.5m and then to £1.25m) protections were put into place so that those already at those levels wouldn't be affected.
And that’s what I’m relying on with mine. If changes do affect my tax-free element my advisor is ready to crystallise it for me. Decisions then to be made about how to invest/spend it 😊
I took my 25% tax free cash from my SIPP last year and am very pleased I did. If Labour stay in government they will most likely be coming for it sooner or later. I voted Labour but it could be a very expensive vote.
It's one of the few times I wish I was a couple of years older, still 2 years 3 months and 15 days until I can get my tax free lump sum out!!
So I have an old final salary pension as well as my current work pension. I was in it for 13 years, I’m 57 so could take this but was hanging on until I’m 60. Would it be a good idea to take this now & guarantee my 25% lump sum , what with all the uncertainties ?!
You could do. What is the normal retirement age for the scheme ? I'd expect there to be penalties/actuarial reductions if you took it early. If the retirement age was 60 then you might only lose 10-12% of the lump sum. If it was 65 it might not be worth it.
Always good to get an annual statement of its current value & options to take it early.
A simple point, but a very crucial one. Whilst I could retire at 55 and take my pension, my old DB scheme had a built in retirement age of 60. They would have reduced my annual pension by 20% (4% for every year to 60) if I had stayed in the scheme and it was another key reason for me opting to move the full pension to a SIPP and take a flexible drawdown.
Yes, I moved the full pension to a SIPP and then withdrew the full 25% tax free lump sum when Rachel Reeves started hinting about a cash grab.
And then what did you do with the 25% TFC ?? Dont tell me it's in deposit account or PB's !
I’m not having anyone on here dis the premium bonds!!! 😂 (but I do agree really……)
Feel rather smug that I was right to stay in small caps. If only we could have days like this every day!
I'm purely in ETF's now in my SIPP with Fidelity
FTSE 100 & 250 Nasdaq S&P500 iShares Euro Stoxx iShares Japan (actually my best performer) iShares Emerging Markets L&G UK PLC
Whilst I bought in over about 6-8 weeks from late March and have bought and sold a few times within these (and also bought and sold a few individual shares a couple of which did very well), the current holdings are up from 4.94% to 14.3% and overall I'm up 23.5% (which includes the buying and selling and I still have around 1/3rd in cash).
I've been astonished how much my pension has grown the last 8-10 years, of course part of that is compounding (and I do still pay in a small amount) but even still it's at a level I would never have dreamed of 10 years ago.
Just today I'm up £2,976! (Tuesday I'll probably be down £3k )
Feel rather smug that I was right to stay in small caps. If only we could have days like this every day!
I'm purely in ETF's now in my SIPP with Fidelity
FTSE 100 & 250 Nasdaq S&P500 iShares Euro Stoxx iShares Japan (actually my best performer) iShares Emerging Markets L&G UK PLC
Whilst I bought in over about 6-8 weeks from late March and have bought and sold a few times within these (and also bought and sold a few individual shares a couple of which did very well), the current holdings are up from 4.94% to 14.3% and overall I'm up 23.5% (which includes the buying and selling and I still have around 1/3rd in cash).
I've been astonished how much my pension has grown the last 8-10 years, of course part of that is compounding (and I do still pay in a small amount) but even still it's at a level I would never have dreamed of 10 years ago.
Just today I'm up £2,976! (Tuesday I'll probably be down £3k )
Really happy for you mate, sounds like you've got a great retirement lined up! When the time comes, what's your plan? Will you just derisk and move into more bonds/cash? I'm 34 and currently in the "high risk" phase, not sure what I'll be doing in my 50s-70s from an investment perspective.
Feel rather smug that I was right to stay in small caps. If only we could have days like this every day!
I'm purely in ETF's now in my SIPP with Fidelity
FTSE 100 & 250 Nasdaq S&P500 iShares Euro Stoxx iShares Japan (actually my best performer) iShares Emerging Markets L&G UK PLC
Whilst I bought in over about 6-8 weeks from late March and have bought and sold a few times within these (and also bought and sold a few individual shares a couple of which did very well), the current holdings are up from 4.94% to 14.3% and overall I'm up 23.5% (which includes the buying and selling and I still have around 1/3rd in cash).
I've been astonished how much my pension has grown the last 8-10 years, of course part of that is compounding (and I do still pay in a small amount) but even still it's at a level I would never have dreamed of 10 years ago.
Just today I'm up £2,976! (Tuesday I'll probably be down £3k )
Really happy for you mate, sounds like you've got a great retirement lined up! When the time comes, what's your plan? Will you just derisk and move into more bonds/cash? I'm 34 and currently in the "high risk" phase, not sure what I'll be doing in my 50s-70s from an investment perspective.
I'm 53 in December this year, so I do just fall into the 'draw at 55' before they increase to 57 in April 2028. I probably need to take Golfie's paid advice but my plan at the moment is:
December 2027 (aged 55) take the full cash free lump sum (assuming the rules don't change!) from my SIPP but leave the remainder invested and continue contributing (assuming I am still at work) to both my SIPP and works pension. At that point I will likely start to move over a year to 18 months to a position of around 1/3 to a half in cash/bonds but leave the rest invested. My current plan is to retire around the end of 2029 when I'll be 57 but I may bring that forward or could even extend for a year or two more, depends how much I'm still enjoying work and what my wife is doing.
Until the April 2027 rule change whereby Pensions now form part of your estate I was originally going to just leave my pension (just draw the £12.5k tax free amount annually until state pension age) and spend everything else once I do retire. I'm currently reviewing that as now makes no sense as whether in a pension or elsewhere from an IHT perspective makes no difference.
I'm in the fortunate position to have had a very good career and have always lived well within my means and have therefore invested and saved quite wisely/considerably. I also own a house worth a fair amount north of £1m (still have a mortgage but that will be paid off in a coupe of years).
So the decision will then be where we live etc. I'd always said to my kids our intention is to spend the lot, but they'll inherit the house, but that will still mean a fair amount of IHT to pay under current rules and whilst it is an aim I doubt we'd spend everything anyway.
So I'll see where we are in a few years time, but ultimately if the tax burden continues on it's current path I can see us either downsizing and giving a lot away soon, or moving elsewhere (abroad). Whilst I've never had an issue paying my taxes, I'd be a fool not to consider the most tax efficient way to live and die, as I always have.
Another great day on the markets, I’m way ahead on my pension this tax year, it’s earning more than I do 😂
Yeah.....US &UK markets hitting all time highs. US boosted by Jerome Powell hinting at a base rate cut next month.
However any gains in funds focused on US stocks, but denominated in £s will have seen those gains blunted by another 1% fall in the dollar against a basket of currencies.
By the way @Rob7Lee, since I see you contemplating joining the mythical exit of millionaires because of Rachel Reeves, I would just like to point out that once HMRC have taken their 6 months or so to confirm my tax-non resident status to H-L, I will start drawing down some wedge from my SIPP. I will be be paying Czech income tax on any and all money I draw down in a given year. There is no escape, since HMRC rather cleverly require on the form for “NT “status an official confirmation from the foreign tax authority that the applicant is tax resident there - thus alerting that tax authority to look out for declarations of drawdown income from the applicant in future returns.
And while my tiny Czech state pension is paid net of tax, my almost as tiny UK state pension is also taxable income here. This is normal practice in normal European countries. It is a rather common mistake of relocating Brits ( including myself at various times) to rather casually assume that income declared tax-free in the UK is also automatically tax-free elsewhere. Premium Bonds are an example. Every country will have its own view on them. It won’t matter much until you get the million winner, but is an excellent example.
By the way @Rob7Lee, since I see you contemplating joining the mythical exit of millionaires because of Rachel Reeves, I would just like to point out that once HMRC have taken their 6 months or so to confirm my tax-non resident status to H-L, I will start drawing down some wedge from my SIPP. I will be be paying Czech income tax on any and all money I draw down in a given year. There is no escape, since HMRC rather cleverly require on the form for “NT “status an official confirmation from the foreign tax authority that the applicant is tax resident there - thus alerting that tax authority to look out for declarations of drawdown income from the applicant in future returns.
And while my tiny Czech state pension is paid net of tax, my almost as tiny UK state pension is also taxable income here. This is normal practice in normal European countries. It is a rather common mistake of relocating Brits ( including myself at various times) to rather casually assume that income declared tax-free in the UK is also automatically tax-free elsewhere. Premium Bonds are an example. Every country will have its own view on them. It won’t matter much until you get the million winner, but is an excellent example.
You know what they say about death and taxes…..
Fully understand that, it's an option but one I wouldn't take lightly.
Take IoM for instance (not saying I would want to live there!). Broadly 21% income tax (there is a 10% band) and zero IHT - potentially if I/my wife live to a ripe old age, that cold save me/my descendants quite easily towards a 7 figure sum in just those taxes alone.
As an example say I draw £100k a year:
UK - around £30k in income tax currently, IoM under £17k.
But better than that in the IoM you can be assessed as a couple which would save further amounts, based on what each is likely to draw could be a difference between Uk and IoM of around £23-25k. B
Say we lived to 90, that could be as much as £750k less income tax and potentially north of £500k in IHT. £1.25m is not to be sniffed at!!
Jersey is very similar and a more likely destination (going next year for a break)
I took my 25% tax free cash from my SIPP last year and am very pleased I did. If Labour stay in government they will most likely be coming for it sooner or later. I voted Labour but it could be a very expensive vote.
It's one of the few times I wish I was a couple of years older, still 2 years 3 months and 15 days until I can get my tax free lump sum out!!
So I have an old final salary pension as well as my current work pension. I was in it for 13 years, I’m 57 so could take this but was hanging on until I’m 60. Would it be a good idea to take this now & guarantee my 25% lump sum , what with all the uncertainties ?!
A lot of things to consider here before jumping to a conclusion. Besides the normal retirement of the DB scheme, what age are you going to retire. Marginal tax rates on the balance of any DB pension also important.
There has been a few comments on pensions and ways the Government may vary them to raise tax. I have a healthy drawdown pension pot I haven’t touched. The question is do I take my 25% tax free lump sum out or not? I don’t need the cash so do I just leave my pension alone and take a slight risk?
I am leaning towards leaving it alone as I can’t see the Government touching existing pension pots or the 25% tax free element. Even if the did, I assume time would be given to make changes and withdraw funds?
Anyone got any thoughts on what the Government may or may not do?
There has been a few comments on pensions and ways the Government may vary them to raise tax. I have a healthy drawdown pension pot I haven’t touched. The question is do I take my 25% tax free lump sum out or not? I don’t need the cash so do I just leave my pension alone and take a slight risk?
I am leaning towards leaving it alone as I can’t see the Government touching existing pension pots or the 25% tax free element. Even if the did, I assume time would be given to make changes and withdraw funds?
Anyone got any thoughts on what the Government may or may not do?
Nobody knows.
You could take the 25% now but bare in mind that isn't then growing in the pension pot. But it doesn't trigger the Money Purchase Annual Allowance so you could continue to pay into the scheme from 'earned income' at the full rate up to 100% of salary (capped at £60k)- that's unless you've already triggered the MPAA from another pension. I think there's a chance that the £268k tax free limit could be reduced but as you say it's not likely to be until the start of the new tax year. The other issue the Government would face by delaying any implementation is that all those over 55 who haven't taken their 25% yet would take it now and the pension industry would be in turmoil. For that reason it would only likely affect those under 55 come the start of the new tax year and they would leave those who could take their pension before April unaffected by any changes.
Much more likely is a reduction in tax relief for higher rate tax payers - perhaps to a flat rate of 25%.
Thing is no-one knows. My thoughts are that the Government usually gives some notice of major pension changes & usually have to go through Parliament first. Also, in the recent past, protections have been put in place when pension reductions have been put in place.
And as you then say, what do you do with the money ? If you are talking about less than £50k TFC then this can be absorbed into ISA's over the 25/26 & 26/27 tax years. If you are talking in excess of £100k then its pointless taking out tax-free cash only to put it on deposit & paying tax on the interest.
There has been a few comments on pensions and ways the Government may vary them to raise tax. I have a healthy drawdown pension pot I haven’t touched. The question is do I take my 25% tax free lump sum out or not? I don’t need the cash so do I just leave my pension alone and take a slight risk?
I am leaning towards leaving it alone as I can’t see the Government touching existing pension pots or the 25% tax free element. Even if the did, I assume time would be given to make changes and withdraw funds?
Anyone got any thoughts on what the Government may or may not do?
Nobody knows.
You could take the 25% now but bare in mind that isn't then growing in the pension pot. But it doesn't trigger the Money Purchase Annual Allowance so you could continue to pay into the scheme from 'earned income' at the full rate up to 100% of salary (capped at £60k)- that's unless you've already triggered the MPAA from another pension. I think there's a chance that the £268k tax free limit could be reduced but as you say it's not likely to be until the start of the new tax year. The other issue the Government would face by delaying any implementation is that all those over 55 who haven't taken their 25% yet would take it now and the pension industry would be in turmoil. For that reason it would only likely affect those under 55 come the start of the new tax year and they would leave those who could take their pension before April unaffected by any changes.
Much more likely is a reduction in tax relief for higher rate tax payers - perhaps to a flat rate of 25%.
You can still invest the money in a stocks and shares isa so it continues to grow, but as golfaddick says, it’s pointless doing it above a certain threshold as you’ll just be paying tax on the interest/get a chunky CGT bill when you come to sell. As should be done when talking about your pension and what to do - consult a financial advisor who’ll be able to look at your specific circumstances and aims!
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We used to anticipate project spend to follow up on budget items.
And remember, when the LTA was reduced (from £2m to £1.5m and then to £1.25m) protections were put into place so that those already at those levels wouldn't be affected.
FTSE 100 & 250
Nasdaq
S&P500
iShares Euro Stoxx
iShares Japan (actually my best performer)
iShares Emerging Markets
L&G UK PLC
Whilst I bought in over about 6-8 weeks from late March and have bought and sold a few times within these (and also bought and sold a few individual shares a couple of which did very well), the current holdings are up from 4.94% to 14.3% and overall I'm up 23.5% (which includes the buying and selling and I still have around 1/3rd in cash).
I've been astonished how much my pension has grown the last 8-10 years, of course part of that is compounding (and I do still pay in a small amount) but even still it's at a level I would never have dreamed of 10 years ago.
Just today I'm up £2,976! (Tuesday I'll probably be down £3k
I'm 53 in December this year, so I do just fall into the 'draw at 55' before they increase to 57 in April 2028. I probably need to take Golfie's paid advice but my plan at the moment is:
December 2027 (aged 55) take the full cash free lump sum (assuming the rules don't change!) from my SIPP but leave the remainder invested and continue contributing (assuming I am still at work) to both my SIPP and works pension. At that point I will likely start to move over a year to 18 months to a position of around 1/3 to a half in cash/bonds but leave the rest invested. My current plan is to retire around the end of 2029 when I'll be 57 but I may bring that forward or could even extend for a year or two more, depends how much I'm still enjoying work and what my wife is doing.
Until the April 2027 rule change whereby Pensions now form part of your estate I was originally going to just leave my pension (just draw the £12.5k tax free amount annually until state pension age) and spend everything else once I do retire. I'm currently reviewing that as now makes no sense as whether in a pension or elsewhere from an IHT perspective makes no difference.
I'm in the fortunate position to have had a very good career and have always lived well within my means and have therefore invested and saved quite wisely/considerably. I also own a house worth a fair amount north of £1m (still have a mortgage but that will be paid off in a coupe of years).
So the decision will then be where we live etc. I'd always said to my kids our intention is to spend the lot, but they'll inherit the house, but that will still mean a fair amount of IHT to pay under current rules and whilst it is an aim I doubt we'd spend everything anyway.
So I'll see where we are in a few years time, but ultimately if the tax burden continues on it's current path I can see us either downsizing and giving a lot away soon, or moving elsewhere (abroad). Whilst I've never had an issue paying my taxes, I'd be a fool not to consider the most tax efficient way to live and die, as I always have.
Take IoM for instance (not saying I would want to live there!). Broadly 21% income tax (there is a 10% band) and zero IHT - potentially if I/my wife live to a ripe old age, that cold save me/my descendants quite easily towards a 7 figure sum in just those taxes alone.
As an example say I draw £100k a year:
UK - around £30k in income tax currently, IoM under £17k.
But better than that in the IoM you can be assessed as a couple which would save further amounts, based on what each is likely to draw could be a difference between Uk and IoM of around £23-25k. B
Say we lived to 90, that could be as much as £750k less income tax and potentially north of £500k in IHT. £1.25m is not to be sniffed at!!
Jersey is very similar and a more likely destination (going next year for a break)
I am leaning towards leaving it alone as I can’t see the Government touching existing pension pots or the 25% tax free element. Even if the did, I assume time would be given to make changes and withdraw funds?
And as you then say, what do you do with the money ? If you are talking about less than £50k TFC then this can be absorbed into ISA's over the 25/26 & 26/27 tax years. If you are talking in excess of £100k then its pointless taking out tax-free cash only to put it on deposit & paying tax on the interest.
£0 on Max holding for Mrs R7L
£0 for daughter on about half holding
Bit of a rotten month!
Father in law to follow….. edit £50 on Max