How much of a one go hit can a Chancellor get away with?
Discussion
I've just been reading that the IFS are calling on the Chancellor to reduce the cap on the 25% tax free lump sum from £268k to £100k.
Of course we'll all have our own views on whether or not this would be a reasonable or desirable policy - personally it would put my retirement plans back by at least a couple of years, but at the same time I can see how it could be justified, given that everything was tax free on the way in - but in this instance I was wondering how quickly that sort of change could be brought in without it having huge consequences?
Obviously it would be grotesquely unfair for Bill to lose out on £168k just because he was randomly born as little as a few minutes after Ben, so presumably it couldn't all be done in a single hit? We've seen increases to State pension ages announced years in advance to allow people to plan for their retirements for example, but on the other hand, if you said this change was going to come in 3 years from now, obviously anyone who can will crystallise their pension before then to avoid missing out.
Presumably there would also be no attempt to claw anything back from anyone who has already retired either, and given how much intergenerational resentment there already is towards the "had it all and paid f
k all" generation in retirement today, surely the consequences of plundering the wallets of those of working age yet further to keep giving wealthy pensioners above inflation pay rises would just be massive?
Of course we'll all have our own views on whether or not this would be a reasonable or desirable policy - personally it would put my retirement plans back by at least a couple of years, but at the same time I can see how it could be justified, given that everything was tax free on the way in - but in this instance I was wondering how quickly that sort of change could be brought in without it having huge consequences?
Obviously it would be grotesquely unfair for Bill to lose out on £168k just because he was randomly born as little as a few minutes after Ben, so presumably it couldn't all be done in a single hit? We've seen increases to State pension ages announced years in advance to allow people to plan for their retirements for example, but on the other hand, if you said this change was going to come in 3 years from now, obviously anyone who can will crystallise their pension before then to avoid missing out.
Presumably there would also be no attempt to claw anything back from anyone who has already retired either, and given how much intergenerational resentment there already is towards the "had it all and paid f
k all" generation in retirement today, surely the consequences of plundering the wallets of those of working age yet further to keep giving wealthy pensioners above inflation pay rises would just be massive?Perhaps by encouraging people to take outtheir lump sums now, the chancer will boost the economy?
Once the lump sum you can take is limited, there's often no rush to take it. Maybe people will 'borrow against it' instead? For instance people who hit pension age with an outstanding mortgage.
I think chancers have got away with a lot over the last 30 years, there's very few tricks left to play.
The country is being exposed as the loss making basket case it's become.
As for the inter-generation bullst, my generation paid a lot of tax when we were making real money exporting real goods and services.The current generation is mostly about selling coffee to one another, doing very little to bring money into the country.
But the country has been pissing away the wealth accrued by previous generations for probably 150 years now, nothing new really, but we could be getting close to the end game.
Once the lump sum you can take is limited, there's often no rush to take it. Maybe people will 'borrow against it' instead? For instance people who hit pension age with an outstanding mortgage.
I think chancers have got away with a lot over the last 30 years, there's very few tricks left to play.
The country is being exposed as the loss making basket case it's become.
As for the inter-generation bulls
t, my generation paid a lot of tax when we were making real money exporting real goods and services.The current generation is mostly about selling coffee to one another, doing very little to bring money into the country.But the country has been pissing away the wealth accrued by previous generations for probably 150 years now, nothing new really, but we could be getting close to the end game.
Kermit power said:
I've just been reading that the IFS are calling on the Chancellor to reduce the cap on the 25% tax free lump sum from £268k to £100k.
Not going to happen.Over the years the IFS has come up with some ridiculous suggestions.
Kermit power said:
I've just been reading that the IFS are calling on the Chancellor to reduce the cap on the 25% tax free lump sum from £268k to £100k.
Of course we'll all have our own views on whether or not this would be a reasonable or desirable policy - personally it would put my retirement plans back by at least a couple of years, but at the same time I can see how it could be justified, given that everything was tax free on the way in - but in this instance I was wondering how quickly that sort of change could be brought in without it having huge consequences?
Obviously it would be grotesquely unfair for Bill to lose out on £168k just because he was randomly born as little as a few minutes after Ben, so presumably it couldn't all be done in a single hit? We've seen increases to State pension ages announced years in advance to allow people to plan for their retirements for example, but on the other hand, if you said this change was going to come in 3 years from now, obviously anyone who can will crystallise their pension before then to avoid missing out.
Presumably there would also be no attempt to claw anything back from anyone who has already retired either, and given how much intergenerational resentment there already is towards the "had it all and paid fk all" generation in retirement today, surely the consequences of plundering the wallets of those of working age yet further to keep giving wealthy pensioners above inflation pay rises would just be massive?
I am a bit worried about all the talk around pensions as I am now deep into higher rate tax and do not have much a pension and was hoping to change that fact. The above though sounds like a sensible change that wouldn't impact on those struggling to save enough for a still relatively comfortable retirement. As you say it is the cliff edge aspect that is the problem and perhaps a gradual reduction over years would be fairer. Of course we'll all have our own views on whether or not this would be a reasonable or desirable policy - personally it would put my retirement plans back by at least a couple of years, but at the same time I can see how it could be justified, given that everything was tax free on the way in - but in this instance I was wondering how quickly that sort of change could be brought in without it having huge consequences?
Obviously it would be grotesquely unfair for Bill to lose out on £168k just because he was randomly born as little as a few minutes after Ben, so presumably it couldn't all be done in a single hit? We've seen increases to State pension ages announced years in advance to allow people to plan for their retirements for example, but on the other hand, if you said this change was going to come in 3 years from now, obviously anyone who can will crystallise their pension before then to avoid missing out.
Presumably there would also be no attempt to claw anything back from anyone who has already retired either, and given how much intergenerational resentment there already is towards the "had it all and paid f
k all" generation in retirement today, surely the consequences of plundering the wallets of those of working age yet further to keep giving wealthy pensioners above inflation pay rises would just be massive?Tango13 said:
ChocolateFrog said:
What's the size of the average lump sum? I genuinely have no idea so no idea how many people a reduction like that would affect.
I read the other day that the average pension pot in the UK is something like £57k so less than £15k. Think it is around £190K (all pensions held) for those nearing retirement.
Tango13 said:
I read the other day that the average pension pot in the UK is something like £57k so less than £15k.
That’s roughly the numbers I’ve always seen bandied around. But I’ve never seen a breakdown of what it actually means.
Do they mean each individual has a total pot(s) size of £57k ?
Or do they mean that if you ask the pension providers, the mean pot size is £57k.
I think it’s the second case, in which case the number is misleading as many people have multiple pots. (I’ve got 5 currently) and what we really need to know is the first number
Tango13 said:
I read the other day that the average pension pot in the UK is something like £57k so less than £15k.
Be careful of statistics and other associated lies 
That sounds like it's the average figure for everyone - including the snotty 21 year old who is only just starting out.
Average for someone nearer to retirement, which has to be the more pertinent answer, was recently assessed at closer to £228k (male) and £153k (female)
Source, given all these threads descend into people demanding "proof": https://www.charles-stanley.co.uk/insights/comment...
(Of course the source comes with the associated statistics = lies ? warning too!!!)
Reducing the amount of TFC has been a discussion point for some time and the general consensus seems to be that’s it unlikely but not impossible.
In reality for RR to strike a balance between outright theft whilst reducing the so called black hole ( whatever the reasons behind this and whether the recently agreed pay rises are included within this ) whilst all the time encouraging growth ,means she is more likely to do a lot of things but with none of them being horrific - don’t forget there is always next year too.
Unless Rufus is Rachel I don’t think anyone can say it won’t happen and that’s why quite a number of people ( me included ) have already withdrawn the 25% or are in the process of doing so.
It possibly boils down to your attitude to risk and whether that 25% is already earmarked for something else and you don’t want to take the chance of losing that chance.
If she does reduce it then I would guess it would take effect there and then as otherwise with an advance date it would just create a run to take out although perhaps that’s the growth banged on about.
Conversely I don’t believe she can apply a retroactive date.
In reality for RR to strike a balance between outright theft whilst reducing the so called black hole ( whatever the reasons behind this and whether the recently agreed pay rises are included within this ) whilst all the time encouraging growth ,means she is more likely to do a lot of things but with none of them being horrific - don’t forget there is always next year too.
Unless Rufus is Rachel I don’t think anyone can say it won’t happen and that’s why quite a number of people ( me included ) have already withdrawn the 25% or are in the process of doing so.
It possibly boils down to your attitude to risk and whether that 25% is already earmarked for something else and you don’t want to take the chance of losing that chance.
If she does reduce it then I would guess it would take effect there and then as otherwise with an advance date it would just create a run to take out although perhaps that’s the growth banged on about.
Conversely I don’t believe she can apply a retroactive date.
gruffalo said:
This is why i am taking the 25% now and not next year when i would probably start drawing on my pension.
The money will be reinvested in ISA's as quickly asit can be, £40k per year and the rest in a savings account in joint names with my wife so we get 2xCGT allowance.
What makes you think ISA allowances will remain as they are today?The money will be reinvested in ISA's as quickly asit can be, £40k per year and the rest in a savings account in joint names with my wife so we get 2xCGT allowance.
alscar said:
Agree that they will be looked at but doubt that will be effective until the start of the next tax year.
Presumably a grandfathering in of total will also be introduced.
I think people who dare to try and provide for their future are going to get bummed. No tax rises for working people is the mantra. They seem to define that as someone who works on a hand to mouth basis and has nothing in the way of savings. Presumably a grandfathering in of total will also be introduced.
troika said:
I think people who dare to try and provide for their future are going to get bummed. No tax rises for working people is the mantra. They seem to define that as someone who works on a hand to mouth basis and has nothing in the way of savings.
Yup seems generally to be the thinking from Labour but why should anyone be surprised ?I do think ISA’s will be capped ( and grandfathered ) it’s just a case of what that cap is set at.
Presumably fairly low ie once you have reached that limit then that’s it.
Hopefully on any withdrawal they won’t also try and introduce any form of taxation ?!
alscar said:
Yup seems generally to be the thinking from Labour but why should anyone be surprised ?
I do think ISA’s will be capped ( and grandfathered ) it’s just a case of what that cap is set at.
Presumably fairly low ie once you have reached that limit then that’s it.
Hopefully on any withdrawal they won’t also try and introduce any form of taxation ?!
Yep. I expect the £500 / £1K tax free interest on savings to disappear too. Maybe not just a cap on pension TFLS but a reduction from 25% to say 20%, as well as higher rate tax relief on contributions disappearing. I do think ISA’s will be capped ( and grandfathered ) it’s just a case of what that cap is set at.
Presumably fairly low ie once you have reached that limit then that’s it.
Hopefully on any withdrawal they won’t also try and introduce any form of taxation ?!
I knew I should have put a caveat on what constituted 'average' 
I can see them bringing in a lower tax free lump sum on some sort taper depending on how much you have in your pension pot.
That would almost certainly fail at the first hurdle due to people having multiple pots, I have four, someone else posted they have five so the limit to the size of the pot would be punitive.
I can see them bringing in a lower tax free lump sum on some sort taper depending on how much you have in your pension pot.
That would almost certainly fail at the first hurdle due to people having multiple pots, I have four, someone else posted they have five so the limit to the size of the pot would be punitive.
troika said:
alscar said:
Yup seems generally to be the thinking from Labour but why should anyone be surprised ?
I do think ISA’s will be capped ( and grandfathered ) it’s just a case of what that cap is set at.
Presumably fairly low ie once you have reached that limit then that’s it.
Hopefully on any withdrawal they won’t also try and introduce any form of taxation ?!
Yep. I expect the £500 / £1K tax free interest on savings to disappear too. Maybe not just a cap on pension TFLS but a reduction from 25% to say 20%, as well as higher rate tax relief on contributions disappearing. I do think ISA’s will be capped ( and grandfathered ) it’s just a case of what that cap is set at.
Presumably fairly low ie once you have reached that limit then that’s it.
Hopefully on any withdrawal they won’t also try and introduce any form of taxation ?!
I can’t see the abolition of the TFC but either a monetary cap ( across all pots in the aggregate ) and in conjunction a percentage drop as you say.
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