Preparing to Retire

[SpokeyDokey]

And now I'll most likely be contributing to my staff's pensions come auto enrolment.

But think of the warm glow you'll get by doing your bit.

 

[Markymark]

But think of the warm glow you'll get by doing your bit.

Yeah because it's not like I already pay shed loads of tax. At least this goes direct to them.

 

[Flying Dodo]

"The current perk allows people to access 25pc of their pension pots tax-free in a single lump sum when they reach 55."

You pay tax on your lump sum when you retire - If you take 25% out tax free when you reach 55 the government loses income from the tax on that 25% - they wont lose income if they stop you taking it out at 55 and you have to wait until you retire.

edit: If you have a lump sum of £50K, you can take out £12.5K tax free when you reach 55. You take out the other £37.5K when you retire and pay tax on it. This 'perk' will be taken away, not the lump sum. You will have to wait until you retire before you can draw on the £50K and you'll be taxed on the whole lot.

https://www.gov.uk/tax-on-pension/getting-taxfree-pension-income

(I could of course be completely wrong, I'm a scientist not a financial wizzard)

There's all sorts of rumours floating around, tied in with the consultation the Government ran last year about tax relief on pensions, and ways to reduce expenditure. The front runner had been a restriction on the rate of tax relief, so abolishing higher rate relief, and introducing a flat rate of around 25%. However in the last week or so, the idea has popped up about abolishing the 25% tax free allowance. Even if that did go ahead, it could only be on any money accruing after the Budget (16th March) and they couldn't get away with retrospectively removing it entirely.

It's more likely that it's simply a smokescreen for some other tedious way of restricting pension accrual and reducing Government costs. I'm expecting some restriction on the use of salary sacrifice which could have a nasty knock on effect for the Cycle to Work scheme. We'll have to see.

 

[SpokeyDokey]

http://www.telegraph.co.uk/finance/...-need-to-take-my-tax-free-lump-sum-today.html

@Dirk Thrust

Thanks for that.

Sounds like a storm in a teacup - as per the article it would be political suicide to enact this with current schemes.

I cleared out all my private pension pots way back as they had performed spectacularly well due to luck and not judgement on my part. I thought I would be pushing my luck to expect any more.

Also took my single works pension at 53 (legislation was different then) just prior to all the final salary schemes starting to go squiffy. good move in retrospect.

 

[SpokeyDokey]

Yeah because it's not like I already pay shed loads of tax. At least this goes direct to them.

@Markymark

I was only playing!

I do sympathise.

 

[Flying Dodo]

It is time that was either restructured or put out of its misery.

Very true. Although there's no way of knowing exactly how many people use salary sacrifice now, but all of our clients' pension schemes are all converted from traditional employee contributions to using salary sacrifice, so that's an awful lot of saved NI. My Budget prediction is some form of restriction for higher earners above £100,000, so no more than 15% can be sacrificed into pension.

I've always wondered if official statistics for wage growth do factor in the take up of salary sacrifice.

 

[midlife]

NI is changing in April, I'll pay more but more importantly my employer will pay 1.1 billion quid more, that will get the pensions people to think again....

Shaun

 

[Drago]

And I'll be retired on 8th April so avoid being stiffed under the new NI arrangement Would've been something like 45 quid a month extra out of my pay - well screw you Mr Osborne.

 

[screenman]

Are you retiring Drago, I never knew that

Lucky bugger.

 

[Drago]

I know, I know, I never mentioned it

 

[midlife]

And I'll be retired on 8th April so avoid being stiffed under the new NI arrangement Would've been something like 45 quid a month extra out of my pay - well screw you Mr Osborne.

Unfortunately I'll cop for it and at 56 years old I'll be copping for that and more for the next 9 years

Shaun

 

[SpokeyDokey]

Unfortunately I'll cop for it and at 56 years old I'll be copping for that and more for the next 9 years

Shaun

@midlife

Not that this will affect me now but, presuming this is the scrapping of the contracting out rebate that is mentioned here?

If so, is the loss of the contracting out rebate not counteracted by the fact that being contracted back in will reduce the reduction in the current State Pension Scheme arrangements for contracted out periods?

Not an expert in this but just an 'out of interest' question. I also accept in advance that P2 above may well be a load of old cobblers.

The contracted out reductions are pretty hefty - my current forecast for State Pension (Basic and S2P) is £11800 reduced to £8800 for an 10 year contracted out period way back.