Reply With QuoteI agree. The changes to LTA were essentially phased in to allow a decent period to make reasoned choices.Originally Posted by mr noble
Also worth noting that just because you crystallise a certain amount you don't have to take that all out of your SIPP.
eg in roundish numbers as long as you've got at least 480k in your pot:
Retire at 57, crystalise 48k a year but only take out 25% tax free + 12570 (basic rate tax band) giving you 24570 tax free for 10 years until your SPA when it will all be taxable anyway (you leave the remaining 23430 in your SIPP every year adding to the crystallised pot within your SIPP).
I agree. The changes to LTA were essentially phased in to allow a decent period to make reasoned choices.
True ... but the chancellor is looking for a lot of money and the amount of money tied up in pensions is huge compared to what is stashed away in ISAs so if he needs a lot of tax, which he does, then he's going to go sniffing around the easiest and biggest pot to dip in which is pensions.
My retirement is a mix of property, SIPP and ISAs.
The 25% tax free lump sum is a rather generous relief a looks like "low hanging fruit" to an impoverished government which probably wouldn't lose too many votes.
Aside from those with a healthy pension pot that would be hit by removing that tax free lump sum - more likely Tory voters
Granted but the money has to come for somewhere and Tory voters have most of it ...
True, but you said wouldnt lose too many votes, and you would have thought this would do just that
Maybe. I dont have any access to what proportion of the uk population make a 25% tax free draw down.
Be careful if you plan to continue contributing to your pension - I believe there are rules that limit contributions after one has commenced drawdown. This is to prevent folk attempting to effectively withdraw and then re-invest for tax avoidance purposes
I have not contributed for years. More than 10.
The tax-free lump sum is (as far as I am aware) an option in most private and private sector schemes but hard wired in at least some public sector schemes. I doubt removing the tax advantage would be any more popular with one political partys members than another.
Presumably the ridiculously generous MPs pension scheme offers a tax free cash option so would guess approximately zero chance of the law there changing.
didn't stop them screwing everyone on the buy to let taxes; pretty much took the view that the people they were hitting with excess charges (income & CGT) wouldn't switch sides!
they've been circling around pensions for years and hitting gradually by reducing the LTA, annual contribution allowance to 40,000 and further reducing that for high earners. Never say never where tax is concerned.
only if you draw funds from the taxable (75% residual fund). Then the future contribution is capped at 4,000 gross per annum; quite a few people get caught out with this loophole. The PCLS alone doesn't activate this restriction.
i'm 55 in just over a year and due to the aftermath of a divorce will very likely access my PCLS to pay off some of my mortgage debt; i don't have any kids so the IHT issue doesn't affect me. But as previously stated i'd fall into the 'spend everything else first' camp unless there were mitigating circumstances.
Whilst theres never any guarantee with any financial product as it all depends on the government at the time, stopping the tax free cash would be just about the worst decision ever. Firstly the vote loss would be huge and secondly the pension crisis would escalate horrendously. People are living far longer than previously, hence why the state pension keeps rising and will continue to rise. There just arent enough younger working people to continue to fund it indefinitely. Thats why people are automatically enrolled into pensions and employers have to contribute. Its all developed from stake holder schemes that started off with low charging structures. If they get rid of the cash element, people would stop funding pensions full stop and the knock on effect would be truly awful.
As a couple of posters here have said, if you dont have children its an easier decision. However for the majority its kind of odd that you fund a pension for 30 years for example and its likely you could live 30 years if you retire at 55, yet the gut reaction is just to take 25% straight away, regardless of whether leaving it in there to grow may be more beneficial. 30 years is a long time!
Do we have any IFAs on TZ, could do with some basic info.
There are at least a couple just in this thread.
Isn't it that you only get tax refief on the first 4000?
https://www.moneyhelper.org.uk/en/pe...allowance-mpaa
What is the Money Purchase Annual Allowance (MPAA)?
If you start to take money from a defined contribution pension pot, the amount that can be contributed to your defined contribution pensions while still getting tax relief on might reduce. This is known as the Money Purchase Annual Allowance or MPAA. For most people, the total amount that can be contributed to their pensions each tax year which they'll receive tax-relief on is 40,000. This includes any contributions from your employer. But if you trigger the MPAA, this reduces to 4,000 a year.
The MPAA only applies to contributions to defined contribution pensions and not defined benefit pension schemes.
There was an article in the ST a few years ago about a cap on TFC , I asked my IFA about it and he mentioned that it had been discussed at a big meeting and the general feedback was it was too much of a political risk to be responsible for a decision that would effect a lot of folk.
Mind you, there was a curious article I read a few weeks back questioning if SPA should actually rise, as Covids had the impact of reducing average life expectancy.
Thanks for the contributions on this topic.
The conclusion is that the money will remaining in the Vanguard SIPP indefinitely.
I will probably be topping it up further as well which I probably should have been doing …
Fundraiser donation made for the useful advice I received.
Last edited by Montello; 13th January 2022 at 15:27.
You need to take professional advice.
It all depends on your fund valuation as the reality is your considering tax planning really, both IHT and income tax.
If you do crystallise a 25% withdrawal tax free and you are a higher rate tax payer, consider a unit trust over equity ISA vehicle. This allows you to utilise your CGT allowance and each year you can sweep of your tax free gain into an equity ISA. Very efficient.
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Thanks, Ive had a bit of off the record advice. My situation is relatively simple. No kids low rate tax payer.
Seems I have been a little remiss in pension contributions in recent years.
You dont really have a choice how you take a FS pension, other than commuting some of it for cash or taking it early at a penalty. You would be wise to keep some cash set aside for emergencies though
Very helpful forum :)
If you have no spouse/civil partner and/or qualifying dependents then if you die, a defined benefit/“FS” pension dies with you. There’s not pot of savings as there is with a defined contribution/money purchase pension.
Transfer out of DB/FS savings may be an option to consider if you have no qualifying dependents.
Last edited by David_D; 14th January 2022 at 17:34.
Aye ...
Yes, I took advice 10 years ago to transfer out of a DB scheme and it was a very good decision. Obviously it is very difficult to do and I had to be interviewed by SJP head office management at the time to demonstrate that I fully understood the implications of the decision. You are assessed as an experienced investor. Many wont do it now though at the insurance premiums for the advisor are punitive if this recommendation is made. My friend wanted to do it and he couldnt last year.
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Did the same which enabled me to retire early and have the ability to take 25% TFC.
As an aside I wouldnt touch SJP with a barge pole as their charges are high and fund performance mediocre at best.
Absolutely agree, left them years ago. To be fair, remember you can always negotiate charges though on the whole SJP is expensive.
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that is correct, my response was worded badly as the relief is capped; it was mainly aimed at responding to the suggestion of more tax liabilities if you took anything from the fund. Equally the cap is avoided if you annuitise the balance rather than drawdown; but that is another conversation.
Without tax relief though it would be unlikely that a pension would be the most suitable vehicle for future contributions.
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