Will they SCRAP 25% tax-free cash?! - UK Pensions
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So yesterday a new paper came out saying they want to SCRAP TAX-FREE CASH??!
So what should we make of it? 🤔 Well in this video I'm going to tell you my thoughts, a background and what you need to know! 👀
Some of the edits are a bit sharper than usual here! Wanted to get the details out so it remained relevant.
TIMECODES
0:00 - Will they SCRAP tax-free cash?
2:30 - A tax background
4:28 - The upfront tax suggestions
5:52 - The 3 proposals
7:25 - My thoughts
8:30 - The bigger picture here
12:20 - The savings gap is more important than the savings gap
12:54 - Should you be worried?
*Some of you may notice the grading is a bit odd. Was trying things in different formats. Let's put it this way, not a fan!
References
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There are some scams on TH-cam where a profile image is copied then used to promote cryptocurrency scams and all that nonsense. I will never, ever, contact you selling any investment product or service. I would never do that, am not allowed by regulation and it goes against the intention of this channel is to educate and inform.
We keep giving them more and more and getting less and less. They won't stop stamping on us until we riot I swear.
Hmm.. yes it's not a good look. Although, it is just a paper and not policy.
When I read your comment I thought that might be a protest song lyric for a second!
"They won't stop stamping on us, we riot i swear...🎶
Don't change our pensions.. 🎵
PENSIONS BEWARE" 🎶
Could see it in a Dylan or Billy Bragg song.
Cheers for watching. 👍
@PrinciplesPersonalFinance I was more referring to the actions they have taken so far! But yes this is only an idea at the moment! My dad listened to Dylan snd Brag a lot when I was growing up!!! It must have influenced my future youtube comments🤣😁😁😅🤣
@@bobdigi500 😂😂I'm a Dylan and Bragg fan myself. (My dad handed that down to me as-well.)
Cheers for watching 👍
@@bobdigi500 No smoke without fire comes to mind.
I am beyond sick to the back teeth of the eternal pensions meddling, nefarious tactics to try and milk funds through opaque tax changes and attempts to renege on promises made.
If any of these plainly ludicrous proposals ever see the light of day, the populace should erect a scaffold outside Westminster and do to the politicians (liars and self serving thieves) what the French did to the Aristos in 1792. We are over 200 years overdue!
You’ve hit several nails on the head in this video. I have been in work for 40 years with a mix of DB and DC pension funds. The rules governing pensions when I retire (in the next couple of years) are a world away from what they were when I was making career choices decades ago that were influenced, to a large degree, by the then pension provisions. The constant tinkering and “fiscal dragging” of pension allowances makes retirement planning a crap shoot, basically. I also have several friends who are depending on the 25% withdrawal to pay off their mortgages so yes, it’s a big vote loser to mess with it!
Thanks Nigel, yes I really do agree.
The bigger picture on the impact on all the changes often gets lost.
Appreciate you watching and your support. 🙌
I agree. I turn 55 before 2028 and I’m bailing out before this underhand rubbish gets even more out of hand.
When might these proposals be introduced ?
Just turned 55 and I am planning to use the 25% rule to help pay off the mortgage, have to watch and see what happpens
What worries me most is once Stammer and his gang get into power us lot are rich targets for the picking! 🤔 I’m 2 decades older than you lot and all l can say is that whatever government is in power they are ALL lying, cheating, erroneous mother ****ers who don’t give a rats a*se about any of us 😠😠😠😠 Wherever l was encouraged to invest I’m now looking at a tax bill, which at the time didn’t exist! Liars, Liars, Liars the whole f**king lot of ‘em! 😠😠😠😠😠
This is an absolutely fantastic review. Thanks so much for making your thoughts public!
Thanks Daniel, appreciate you watching and the support. 🙌
As someone who worked in the Pensions Industry for more than 25 years (specifically as a "Retirement Consultant"), I just wanted to say how well you tackled this subject. Thankfully I retired a couple of years ago and my knowledge of the system and how to best navigate it has left me in a comfortable position but as you say it is already a nightmare of complexity and any new regs will simply be added to the existing rules and make it even worse. I honestly don't think they will scrap the 25% TFC as it would be a certain vote loser but I can see (and probably expect, a change to a level tax relief). As you quite rightly point out the real problem is persuading more people to save more and personally I think the only way they will do that is to introduce an element of certainty to the returns people get at the end (retirement).
Good luck with the Chanel, you seem well suited to You tubing.
Thanks Steve, that comment really took me back, hugely appreciated! Very grateful to have the kind words of someone with your experience in the profession. 🙏
Wish you all the very best for your retirement and thank you for watching. 🙌
It's really wrong when someone has paid in their entire life to then find out that their tax free lump sum is going to be raided. Shocking. People will likely do one of two things now.
1. Come out of paying into Pensions
2. Spend their pension at 55-57 and have nothing left.
I agree to be honest. People need consistent rules so they can plan and trust if they do things for their future self, they will be rewarded for doing so. Not having the rug pulled by changes in legislation.
Important to remember this is just a paper and may be very unlikely to be taken into policy.
I don't think these suggestions are well thought out though.
Thanks for watching. 🙌
@@PrinciplesPersonalFinance My worry is that i'm reaching retirement in 5 years (i want to retire at 58) and now worry that all that i have saved is now going to the tax man. I have a DB, DC and 2nd DC with buy ins and to find that my lump sum is at risk is annoying as hell. This will affect my ability to live till state kicks in. (if it does they are likely going to make that 75 soon)
Not only that, they want to use that cash to subsidise pensions for ppl who have never contributed N.I towards their old age eg benefit scroungers
@@llamudos9809 Don't worry, you'll be fine if you make it ! lots of people die before retirement age !
@@martinhammett8121 I think that is the plan. Have you seen the excess death rates? One more "pandemic" with "vaccines" should sort it out....
Thank you for this content and would like to hear about Surplus Income and financial gifts please.
Same as holiday calculations at work, going from weeks to hours, they are deliberately made complicated to blind you to the fact that you are being robbed.
Many of these think tanks seem intent on targeting ordinary people who have been financially prudent. The average level of financial literacy in this country makes me fear that these ideas could gain traction.
Solid comment here! 🙌
There was a bit in the video (didn't make the final cut to this video) where I threw my papers in the air on some of the comments in the paper around gilt returns and tax incentives for annuities as opposed to drawdown. I wasn't impressed by what was put forward in general on the paper and I think it lacked real consideration.
Great review and detail. Very helpful. Earned a sub from me!
Thanks for watching!
I really like the document presentation and whooshing noise. Great
Why bother saving for a pension? If you haven’t enough you can get pension credit which also gives you a host of benefits such as council tax discount, free TV licence, free NHS dentistry etc. Also, with the freeze on personal allowances, most private pensions (when added to the state pension) will be fully taxed. And when it comes to going into a care home, the less you have the better as the state picks up the tab in full. No wonder folk aren’t encouraged to save for their own pension.
has anyone else noticed that there is around a sweetspot in the uk of an income of 50k a year 50k 20percent threshold LTA 1M which is an income of around 50k it looks too me that move above the 50k and your going to pay much higher amounts of tax Dividends are now higher taxed and if you run a small company with corp tax and dividend tax your paying more then income tax levels i am going to say isa is next in line for tax reform our country is broke and the money has to come from somewhere and it will be paid for from anyone makeing or earning more than 50k a year
Hi there just found your channel and you explain pension better than others. Is there the possibility you could do a podcast on the pros & cons of NHS pensions starting with the 1995 which has now ceased since March 2022 and all staff automatically transferred onto the Career Average pension scheme CARE. You would be helping so many nurses. Thank you
Thanks for watching and for your kind words. 🙌
Yes, I worked for a period specialising with NHS professionals. The NHS Scheme is a technical nightmare. 🙃
I'll bear that in mind for future content. I'm a bit torn, I wouldn't consider myself an expert on the NHS Scheme anymore and I know there are many advisers that do, so a bit wary of starting content in a specialism I no longer look after. I'll keep it in mind though! 🤔
I do not know anyone with a DB pension. Most people I know have an underfunded DC pension......and i find it hard to trust what will happen in the future.
Feels like Govt may be getting 3rd parties to put out ideas to judge reaction. Both the ISA limit and this would have a huge impact for some groups.
I assume this type of change would need to go through Parliament which would give a heads-up in terms of time.
I hope that isn't the case, but the cynic in me did think whether they wanted to test the water with some of these concepts.
Even if they did get put forward (huge IF) as you say, long way from law.
Thanks for highlighting this 5:21 most people think taxing the rich more will fix all our problems, but it wont, we have a government spending problem, and no party is any different becouse people keep voting for (free) stuff, but we have to pay for it some how.
I'm worried about the fees my IFA is taking from my diminishing pension pot ( a sipp wrap with Standard Life)
Im 57, working and not taken anything from the fund yet.
The IFA sent me forms to sign when they changed name but i ignored them. Not happy since my original advisor with the firm has retired and a cocky, argumentative new dude has taken his place. I dont know what to do.
My 80k pot has lost 10k in 4 years ......
Any changes to take away benefits from those saving for a pension should be aimed solely at those who have more than the lifetime allowance to play with. Although I do agree that more help should also be given to those who do not earn enough to qualify for higher tax relief while saving.
The only way to make the State pension system be treated fairly by government reviews is to link MP and Civil Service pensions to it.
MPs routinely find ways to boost their own expenses/salaries/pensions whilst at the same time expecting others to manage with much more inferior options and increases.
If MP benefit changes were the same as those for the hoi polloi then they would think much longer and harder before making changes.
Of course, I realise that such a change will NEVER come about because MPs are in politics to look after themselves first and the common people last.
How are we expected to plan our financial futures when they keep moving the goal posts. Annuities are toast so I withdrew my 25% tax free amount and have slowly been drawing down (paying the income tax) to fund ISA's which they are now also looking to target. I have left an amount in my SIPP to draw down just below the tax threshold each year to help bridge to my state pension age of 67, which also doubles as a tax free pay out to my wife if I croak before then.
I agree that consistency is important on legislation. So we can all plan.
Thanks for watching and taking the time to comment 🙌
The idea of 25%. Was to buy an annuity which gave an increased pension higher tax , but government received mor tax from higher income.
I am 63 years old. I was an equal partner in a ltd company . When I was in my 30s.my pension was in a complete mess. I managed to work with a brilliant financial advisor. My pension was built up. I also invested in ISAs. For my circumstances this was ok as I was taking dividends out of the company. My whole retirement plan was beaded on what I could take tax free. At 59 years old it was clear that the business was going to come to end. Basically it involved out of date skill’s which were no longer needed. Hence I retired. Changing the rules now will give me serious problems.
I'm paying a shared cost AVC into my defined benefit pension and I am entitled to the whole amount as a tax free lump sum. What's the equivalent of an AVC for a defined contribution pension?
Thanks for watching.
It's a different set of rules. Defined benefit schemes have a different formula for working out tax-free cash. Unlike the more typical 25% through a money purchase it's common through DB schemes to be able to use connected AVCs to increase the available tax-free cash from the DB.
There isn't really a comparison via DC which allows access to higher tax-free cash or commuting an AVCs as this setup is a function of the DB, not the DC.
We need to adopt something
like the forced savings scheme in Singapore. Too many people in the middle income levels especially living above their long term needs.
That's an interesting comment. Although it was take a brave government to put something like that in place. One of the big issues for auto-enrolment currently is that the contribution levels are too low. So can certainly see the need for it. Tricky with cost of living issues though. Thanks for watching.
I’ve watched so many pension videos and my conclusion is always the same: why are they so complicated? Just tax everyone upfront then allow you to take 100% cash tax free when you retire.
Half the battle seems to be these loopholes and schemes to help maximise the amount people withdraw.. it just make it needlessly complicated.
While on the individual level, don't get me wrong 100% tax-free cash would be great! It would call into question tax relief on contributions.
I'm in agreement that the setup with pensions is too complex but i would definitely re-iterate, that DOES NOT mean they aren't worth engaging with. They remain one of the best ways to save for the long term.
What you describe, Daniel, already exists; it’s called an ISA…. and you don’t need to wait until you retire to take it tax free. The whole point to pensions is they’re a shelter from tax and, if they’re occupational, the employer chips in as well; free money! They’re incredibly generous and no way would I have given mine up for nothing more than an ISA. What’s more, the principle is very simple; what you put in is from pre-tax income, what grows within it is untaxed and what remains in it at death is untaxed. So, if you’re paying a lot of tax during your working life, you can avoid it and, hopefully, pay less when you retire. I know I do. ISAs and pensions need to exist together to get the best of all worlds. The pension becomes your (taxed) income source and the ISA is for avoiding higher rate tax when you have years with large, one-off expenditure.
I've listened to this 3 times...100% says physical studies at the start.
😂 Wouldn't surprise me! This one was a bit of a car crash from my side. Got the grading wrong, had to make some cuts, the edit is choppy and in probably the most serious part of the video I do a 'Borat' and go 'HUGE SUCCESS' 8:36
Apart from that.... I nailed it.
After Maxwell and Equitable Life scandals, pensions were off the menu. Pension freedoms were necessary to incentivise retirement provision again. These proposals would bring this into question once again.
good video. I would love to know what happened at 2.21 minutes in though.
Ah, i can clarify.....
An editing disaster. 🙃 I choose speed on this one but there were 1 or 2 gremlins in the cuts.
Don't worry.... you didn't miss anything good.
I always find it amusing, or is that bemusing, when people try to quantify how much pension income you should be getting. I know a lot of couples with joint working income of less than 30.6k, never mind pension income. Not forgetting that everyone's situations are different, so what you 'need' at retirement will be different for everyone.
I’ve seen the PM has said he’ll remove the tax free cash allowance
so i think they are saying the most Tax free cash they want us to have is 100k i think that would cover most who have a personal pension how much in the uk is the avarage pension fund at retirement
Yes, that is the idea I believe as far as the paper's suggestions.
I'm against that in theory as I think it creates a strange disincentive to save properly. The average UK pension is woefully underfunding, we want to make it more attractive for people to save adequately.
Im more concerned that Labour will bring back LTA which makes planning for, and being aggressive on my pensions saving/investing, problematic. You hit the nail on the head... I simply dont trust the politicians to do right by pensions. They'll raid it anyway they can to fund things they cannot afford
Isn’t it always the case that around any taxation the rules are generally made more complex under the guise of “fairness”. All this does of course is allow the wealthiest to plan and find loopholes, undermining the whole premise while disincentivising the less wealthy and less well informed as they tend to get their information from headlines in newspapers not financial planners. Seems this document is more of the same. Surely simplification is the way to go but of course that never happens.
I'm sadly inclined to agree with a lot of the sentiment here!
Thanks for watching 👍
Brilliant channel and interestimg video. Lifetime allowance. In my opinion this should be abandoned and linked to the tax free contributions.
Thanks for watching and your kind words!
I think you're right as far as an input and output test which we have right now through Annual and Lifetime Allowance does cause a mess.
My son, 27y old, will not save into a pension, as he does not trust others, and especially the government, to look after his money well! I, as a person approaching retirement, used to try to argue otherwise, but not anymore. I can't honestly advise my other children to contribute to pensions if they keep on messing with the rules!
THIS ☝️ is the collateral damage of changing the rules too much.
I would say, they do remain one of the best ways to save.
For anyone as a general comment - opting out of auto-enrolment where you employer contributes as-well is absolute madness. It's the closest thing to 'free money' (although it's technically just another form of pay) so for the vast, vast majority they should not forgo that... their future-self will be glad they made good financial decisions.
(I have to caveat that the above is a general comment and not specific advice directed at any individual,....joys of regulation 🙃)
Thanks for watching and taking the time to comment. 👍
@Principles Personal Finance Yes, but I get more by investing with my son, who takes his cut on top! So why bother with pensions? My other children will invest with my son, and we can bid pensions bye bye! One pound of my money in hand is better than what the government promises, as they will change the rules anyway! Of course not everyone can invest, but for those who can, pension is a poor return!
Tell them to spend spend spend! Iive for today & claim everything going - this country has nothing to offer hard workers! !!
Main question, can I take my pension with me and leave the country?
I didnt trust pensions 40 years ago and now 5 years to retirement i still dont ,i had 5 pensions but cashed 3 in .I only kept my GAR pensions because they give 6.1 % and 10.08%.
Tax free cash from a pension fund has already been limited in 2023 budget.
The minimum amount employers have to put in is derisory, & the cop out of the Lower & upper earning limit give the green light to employers to basically "Take the Piss" . we have some of the lowest contribution rates in Europe !
Thanks for this video. I think this should help people to understand the bleak future ahead, especially those who are in their 30s and 40s or younger. Most of my friends have no clue whatsoever of how their lifes were screwed in the last 20yrs due to reforms (i like to call these anti-reforms really).
First of all the change of the pension legislation which came to life in April 2006. This lead to a mass death of private sector DB schemes in the UK. All people who are 40 and younger pay to DC schemes and will get very little out of it, especially if you take i to account the effect of the inflation (over 10% at the moment) eroding what you have saved so far. But hey, ask any of your friends and I bet they like mine, all thinking they will have the same income 20-30k a year from their workplace pension like their parents when they retire - you fools 😆 !
However, there is another aspect of this situation. The vast majority of those working in public sector (NHS, teachers, police officers, civil servants, politicians etc) they still have access to the DB pension which means when we hit the retirement age they will have the same lavish 30-40-50k a year income from pension whilst you and me will be stuffing shelfs in the supermarket well into our 70s to get the ends meet every month.
Btw These are the same people who are now on strike and get paid every month from the money tax man takes from me and other private sector employees. Isn't it ironic?! I think when more people realize how badly private sector employee is treated and that public sector pensions exists because private sector employee is abused and taxed through the teeth this is when we can expect the riots in the society.
Second reform was university fees introduction. This means most of people of my age still pay their student loan which effectively means addional tax levy. One general rule of money management is: the more tax you pay, the poorer you become. Needless to say: people in their 50s and 60s had the whole education for free (including uni) so apart from having DB pension they didn't have to pay the student loan for 30 yrs yet people from that generation introduced those rules which messed up lifes of future generations...
Third reform was losening the strict currency supply rules, meaning after 2007 the Bank of England is legally printing huge amount of money (never stopped). The effect of which is: the pound value going down faster and faster, inflation raises and ... Increases the houses prices to a stupid level! Many people in their 20s cannot afford to buy their own house, i suspect many will end up renting for their whole life or if they lucky they will end up paying back huge mortgages well into their 60s.
If you combine bad quality pensions (DC), student loans debt and a massive mortgage debts you realise this takes away a lot of your disposable income every month.
You end up running like a hamster in a wheel for most of your life, paying various types of debts accumulated often before you even hit 30th..if you are lucky enough to live to your retirement you will have even more bad news waiting for you because your main source of income will be the mighty Basic State Pension...
So basically "we are fucked "
@@martinhammett8121 thanks for comment. I guess yiu could say that but my intention was to picture the problem, not to depress anyone. I think obce you realise you have a problem, you can start thinking about the solution to this problem. However, on the basis of my conversations with friends and family the vast majority of them have no clue and when i tried to explain I had a feeling they did not entirely believe what I was saying. It is almost as if people want to believe the big brother (government) is going to take good care of them and everything is going to be fine (you know a bit like kids who believe in Santa).
But yes, my intention was lets start talking about solutions, what we can do about it? Perhaps author of this video can suggest anything because frankly on the basis of what he said in this video (IFS study/suggestions) putting more money (locking it) into your pensions may not necessarily be a good idea from the future changes perspective ...
I'm afraid you are completely correct.
Those in their 20's/30's ought be rioting in the streets....if only they paid attention to how they have been screwed.
If it did become gov policy to cut 25% tax free would it take a while before impact? I am 53 and planning to draw down 25% to invest in more tax beneficial options (ISA etc,) and also avoid lifetime allowance problems. I am assuming that I don’t need to worry about this being in by 2025? Please what are your thoughts?
The truth is no-one knows as it's ultimately up to the government... but as I mention in the video. It's my personal view this is highly unlikely and even if it was introduced, there has been very good precedent for transitional rules when things like this are changed.
It's extremely difficult to implement something like this without being brutally unfair on those who miss out. If I was to guess a probability of this happening I would say less than 10%. However, this is my personal estimate.
Thanks for watching 👍
I am massively ignorant about saving and pensions but to me, the more you try to provide for your own old age, the harder it becomes unless you are set up for a golden pay out on retirement as politicians appear to be. If they made it that you could put your own money away in investment and then receive it when you are old without being interfered with and without needing to give the government a share of it, the more savers there would be and the less the gov would even need to worry about state a pensions shortfall.
I have a DB and intend to retire in two years time (63)
My question is simple...... do you think that the government will smash the 25% tax free to bits
by then?
This would blow my goal of retiring early to bits . I have been planning my retirement for 30yrs now
and the thought of that rug being pulled out from underneath me is just down right scary .
Great video mate.
Thanks for watching and your kind words, appreciated.
While I have to caveat that neither I, or anybody else, really knows as it's a government choice to change legislation. Which depends a lot on who is in power. I do feel that there are other areas on pension reform which are more palatable to voters than the tax-free cash. Perhaps pre-75 death benefits for money purchase funds. Or maybe some 'around the edges' areas of pension tax relief.
The thing is with pensions ANY changes are incredibly complex to try and deliver. Such as in your example - how can a government justify that someone retiring this year will benefit from (whatever the rules are) yet someone about to retire, who may have to change their retirement plans as a consequence, does not. For that reason, while not impossible, I would be VERY surprised if we saw wholesale changes to legislation around tax-free cash.
It is my personal view, for this reason. That overarching changes are unlikely. These papers ultimately can say what they want, as they don't need to consider the policy response from the public/voters. But we'll just have to make a best guess!
Thanks for your honest opinion on my question and responding so quickly.
Your response is noted and I totally agree with your thoughts.
I have just subscribed and the next video I will browse will be “ why not to take the 25% tax free”
Much appreciated!!
@@TS-bn7zt thanks, appreciate your support! 🙌
Why? It won't affect you much if you have a DB pension, because you'll get a higher pension by not taking the lump sum. It's the DC people who will be hit the hardest.
@@tancreddehauteville764 Yes, I understand but I intend to use some of the 25% to fund my early retirement.
Around 20% of it in fact. My plans are to enjoy myself while I am still able ( within reason of course)
No good having a good monthly income and being stuck in the house looking out of the window when your infirm.
My remaining 75% will see that I am comfortable later on in life, assuming I get there!!!
I'm 70 now, when I started a pension 21 years ago I was told for every 100k in the pot I would get 10k per year pension.
The truth is I'm was offered 4900 per 100k at 65 years old less than half of the promised amount.
Do you think if you save the sum they are suggesting now 500k they will offer a livable wage in retirement?
Hi, thanks for watching. I guess it depends on what is considered liveable. It's highly individual as one person's frugal is another's extravagant.
10% annuity rates (as you've been previously told to expect) is very high, but rates were much higher many years ago. A good example of how much economic environments can change.
All we can do in my view, is to be mindful or our own personal responsibility to save as best we can for when that day does come.
"The Institute of Physical Studies"?? I was wondering why such a body (pun intended) would be bothered by pensions!
🤣 oh I know! Tried to rush this video out so it was timely and the edit was a bit of a mess! Didn't even pick up on how that sounded until it was out in the world. Joys of content creation.
Think the flat 30% would make sense as would encourage lower paid to contribute more, including the young, and would still make sense for most higher tax payers if you're going to be taking out at basic rate.
They also need to increase the lifetime allowance - although it sounds a lot, £1m would be about £35k a year, so a moderate lifestyle for a couple. You could just keep the annual limit as £40k a year is more than most could pay in and, weirdly, more than you'd be able to draw back out if you'd stayed under the cap.
Yes, I agree with you on these points.
I think 30% probably would be fairer across the board.
I also agree on scrapping the LTA. It should be an input test, not both an input and output. It just causes WAY too much hassle for people to navigate.
Cheers for watching 👍
No, a pot of £1M should get you £40-45k a year unless you retire very early. I don't see the logic in lowering tax relief on pension contributions as this can be evaded quite easily if you are in a scheme that uses salary sacrifice. The easiest thing for Hunt would simply be to cap the yearly contributions to a lower level, say £30k a year.
@@tancreddehauteville764 why? Why pay income tax? It's penalty for work! It's better to pay millions for hotels for Albanians???? Or let people decide what to do with their money?
@@tancreddehauteville764 If you retire at 60, you could well need the pot to last 40 years. A 4.5% withdrawal rate is quite high for that period and more than I'd want to risk.
Lowering the annual limit, or fixing it for a few years with current inflation, makes sense as it's still a high amount for the vast majority. The lifetime allowance is the problem as it puts some people off, tubing they'll break through it and has issues with doctors in particular, as the value of their DB schemes can easily exceed it, pushing them to retire earlier when we need them. With recent comments about keeping over 50s in work, I expect a change around that in the budget.
@@hooksforestchin I'm assuming you retire at 65 and buy an annuity! If you want to retire at 60 with £1M that's a very ambitious target unless you're in a hugely well paid job.
This has me a bit confused, can anyone tell me, in a nutshell, does this apply to the NHS pension lump sum?
Hi, thanks for watching.
This video is a review of a paper on suggested changes to tax-free cash amounts. At the time of writing it is not in effect and as the video states, I personally feel it is unlikely to be implemented. Although that is my personal view.
So - does what is discussed apply to the NHS pension?- No, because it's a paper, not policy.
Will the suggestions potentially impact the NHS Pension going forward? 🤷♂ No-one knows.
@@PrinciplesPersonalFinance Thank you for taking the time to reply. I've subscribed and will keep watching for anything further.
@@oldbootneck thank you, appreciate the support! 🙌
One of pensions has enhanced tax free cash giving 66% tax free across the fund , the rest I have to buy an annuity. The fund is around 180k. Given that the regular 25% is being added post A day I think I will whip it out before they trash all over this feature. If they then remove the 25% from the rest of my schemes then I can mentally deal with it lol.
66% scheme specific tax-free cash. Don't see many of them anymore (good old A day! 🙃)
Thanks for watching and taking the time to comment 👍
There should be a ban on lobby groups, think tanks, and policy study groups influencing H.M.G policy. The only people H.M.G. should be listening to is us, the voters!
I am now coming up to pension age I will still have to work until as long as I can.. My advice to any younger people they need to have 10 to 15 times the amount of money they earn now, saved up for when they reach pension age. The advice from insurance companies is do not give up working totally, as a lot of people who do, pass away 1 to 2 years later, missing the enjoyment of the pot they've accumulated over 50 years.
labour Fabians think tank has more or less same recommendations seems copied from IFS
Sounds like they will panic people into taking money before they otherwise would.
Definitely could be an unintended consequence if there are too many rumours flying around.
Thanks for watching 👍
I am a carer I look after somebody in his 80s he has to pay for his medication now because they did something to the tax threshold of the pensions he can't even get loft insulation for free now. He started work when he was 15 years of age and not he's 80. I don't pay into a private pension nor will I ever I don't trust the government the money will not be there and when I retire I'll have to retire in my 90s because they're going to keep moving the go post I have the state pension I pay into that only because I'm forced too.
TAX TAX pay VAT+TAX LOL
Currently 34 I pay around 60 a week employer 80 a week got a 96k pot at the moment want to hit 400k by 60 then tata
You have an excellent employer then, who pay above & beyond what they have to ! whack in what you can afford & make use of the tax benefit !. Free money is hard to come by !
@@martinhammett8121 Yeh they are great with the pension they pay 10% we pay 5% minimum
Im paying around 8% now usually up it 5/10 pounds every couple of years especially if we get a good pay rise.
Your defo right on free money it would be stupid not to do it.
I get around 60 tax relief a month from the government.
My son, a 27y old, doesn't trust the government or the pension industry! He, a businessman, would rather invest himself and keep his hard earned money out of the grubby hands of the government who keeps on changing the rules to fund their inept management of this country's economy!
I'm 58 and over the LTA for my SIPP -- time to withdraw tax free cash of 25% of the LTA immediately before these criminals steal it.
The whole concept of the LTA is fundamentally flawed and needs to be abolished ASAP.
I agree, the pension system is an absolute shambles due to the jealousy and appeasement of policy makers.
I hear they will increase LTA to make it attractive for people to work longer.
However if I was over LTA I’d be out now.
With the generation X tranche starting to retire in the next 10-15 years we will see far fewer people retiring with defined benefit pensions, as the it has been the boomers who have largely benefitted from this. The consequences of this change are potentially 'nuclear' in impact. For a start, we will see many more people retiring in poverty and also many people being forced to work into their late 60s or even 70s when their health is failing. It will make the state pension more important than ever, and the pressure will build for a much higher state pension, probably at least 50% higher, once this generation starts facing retirement. Getting rid of, or even reducing, the 25% tax free element in a personal money purchase pension will have a MASSIVE impact on those people without a DB scheme, and lead to strident calls for a much higher state pension in order to compensate for this. The government would do better to close the loophole whereby money purchase pension funds are not subject to IHT - this will also lead to more people opting to buy annuities again instead of drawing down, indeed possibly drawing down too much and putting themselves in difficulty in later life.
Spot on comment, all that you have stated WILL come to pass.
What a great comment. I think it is the first time I've seen someone adding the YT comment who understands the bleak future ahead of people who are in their 30s and 40s now. I actually work in finance and many of my friends have no clue whatsoever of how much their life's were screwed in the last 20yrs due to reforms (i like to call the anti-reforms really).
First of all the change of the pension legislation which came to life in April 2006. This lead to a mass death of private sector DB schemes in the UK. All people who are 40 and younger pay to DC schemes and will get very little out it, especially if you take i to account the effect of the inflation (over 10% at the moment) eroding what you have saved so far. But hey, ask any of your friends and I bet like mine they all foolishly think they will have the same income 20-30k a year from their workplace pension when they retire - you fools 😆 !
However, there is another aspect of this situation. The vast majority of those working in public sector (NHS, teachers, police officers, civil servants, politicians etc) they still have access to DB pension which means when we hit the retirement age they will have the same lavish 30-40-50k a year income from pension whilst you and me will be stuffing shelfs well up to our 70s to get the ends meet every month. These are the same people who are now on strike and get paid every month the money that tax man takes from me private sector job. Isn't it laughable to say the least... I think when more people find out how badly private sector employee is treated and that public sector pensions exists because private sector employee is abused and taxes through the teeth this is when we can expect the riots in society.
Second reform was university fees introduction. This means most of people my age still pay their student loan which effectively means addional tax levy. One general rule of finance is: the more tax you pay, the poorer you become. Needless to say: people in their 50s and 60s had the whole education for free (including uni) so they apart from having DB pension they didn't have to pay the student loan for 30 yrs...
Third reform was losening the strict currency supply rules, meaning after 2007 the Bank of England is legally printing huge amount of money (never stopped). The effect of which is: the pound value going down faster and faster, inflation raises and ... Increases the houses prices to a stupid level! Many people in their 20s cannot afford to buy their own house, i suspect many will end up renting for the whole life or if they lucky they will end up paying back huge mortgages well into their 60s.
If you combines bad quality pensions (DC), student loans debt and a massive mortgage debts you realize this takes away a lot of your disposal income every month.
You end up running like a hamster in a wheel, paying various types of debts accumulated often before you even hit 30th..if you are lucky enough to hit your retirement you will have even more bad news waiting for you because your main source of income will be the mighty Basic State Pension...
The country is bankrupt and that PCLS is too attractive to governments seeking to prop up their ludicrous spending plans.
I don't think they will abolish it, but I do think they'll incrementally start reducing it.
Pensions are complicated, and the rules are constantly changing (usually negatively) without any consultation or agreement. For THAT reason, at 48 years old, I'm out. Investing money in something I don't understand or trust is just stupid.
Instead, I'm firing about 30% (around £1,200 per month after tax) into NS&I Premium Bonds (and at £50k will swap to a cash-only ISA). Easy to understand. No smoke-and-mirrors. All tax paid up front. Zero risk (excluding inflation). Complete control of the asset. An actual sum (not merely a 'projection'). The satisfaction of knowing that others are not getting parasitically wealthy from your assets (whilst YOU carry the risk!)
Pensions are designed to be complicated. They are designed to confuse. I would rather have a much lower projection that is real (and just accept poverty is going to be an inevitability) than buy into glossy promises built on shifting-sands....
can you withdraw the tax free 25 % from your pension, but then continue to work and pay into a pension pot?
It is possible to take tax-free cash only from a money purchase pension without triggering the money purchase annual allowance and having a reduced annual allowance. There are rules in place however around pension tax-free cash recycling.
I'd suggest watching my '3 pension tax mistakes to avoid' for more on this!
Thanks
(As always, please take advice specific to you if in doubt)
Shafted, shafted and shafted in this country. Sick of it.
The 2 biggest incentives for saving are pensions and ISAs and i have always believed one should maximise both where possible. The take from this and sadly fom history is that its not the incentives you can't trust its politicians and specifically chancellors and PMs who can't be trusted and they will steal your savings if they can by whatever means, tax, inflation and changing the rules. The conservatives have generally left savings alone but an increasingly desperate government has started to attack them, with the reduction in capital gains tax relief.Also despite promises to simplify theings politicians are incapable of doing so they just have to fiddle.
Making things simpler by making them more complicated is the governments way. If any government really wants to encourage people to save for retirement it needs to demystify the whole process. Good analysis of a waste of space document indeed.
Sadly, I agree with the sentiments of this.
Consistency is needed now.
Thanks for watching. 🙏
I am on universal credit, will i lose it if i take the 25% tax free?
Hi, it's an area you have to be careful with, see below for more detail 👇
www.moneyhelper.org.uk/en/benefits/problems-with-benefits/how-do-savings-and-lump-sum-pay-outs-affect-benefits
This is classic astroturfing; the government slyly put this stuff out to see the reaction.. this is what they want to do, but are unsure whether they can get away with it
The Institute of " physical " Studies ?
Their main objectives include:
- Reductions in tax-free cash
- Amending the NI setup on pension contributions
- 10 push ups for all 🙃
It was a quick edit (as you definitely can tell) so it remained topical. I didn't even pick up on that on the playback!
@@PrinciplesPersonalFinance Haha-I knew who you meant.
Still think you're not a slave, you just cant see the chains !
A race to the bottom.
How to fix all this: No income tax for earners below 40k a year. Everyone will be more wealthy and the economy will get a boost. Instead, we have a crab-like mentality for the poor working are not benefiting from the tax structure so let's make it dearer for the working well-off. The government should get tax from these large corporations finding loopholes and offshore companies, not the little guy receiving PAYE. Over 30 years, wages have remained stagnant and pension plans got worst. While CEO pay grew in massive proportions to their lowest paid worker and stocks soared (Hint where the productivity lifeblood is getting milked too) I'm genuinely considering at this point leaving the UK altogether when my career reaches a point offering it. The only thing holding me here is my immediate family. Why work all your life to give away massive sums to the tax man or have it taken from your pension as tax. Scam. Some offshore tax heavens/nations don't have such harsh tax structures hurting wealth accumulation.
The problem is that if you implemented this, very little income tax would be collected. You would need to double VAT to 40% for a start - how would that help the economy? What I would suggest is increase the personal allowance to around £20k a year, which would be much more feasible.
@@tancreddehauteville764 dealing with my problem as you suggested could be fixed by going after the untargetted in the room. The large corporations paying very little tax....
@@Nobumblegumforyou The problem is that large corporations have an international presence and therefore very complex tax arrangements. Not sure how you could tax them more without international agreements, and this is unlikely to happen as long as many nations choose to be tax havens.
Bullshit. We are either equal or go hell. Yes, no income tax but for all.
@@bartz4439 Are you on drugs?
Please stop that crackle background, it is so distracting, the message is the important thing not the silly special effects.
🙃 everyone has a different view of aesthetics with these things.
I appreciate you watching though and enduring the background music!