Chancellor may tax older taxpayers more than younger.

The_Abyss said:
It has. It rises by CPI, and will be £1.03m from April 2018.
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Actually it hasn't risen yet.

2016/17 - £1m
2017/18 - £1m

You are correct in the future it will rise with inflation. However I never stated it won't rise in the future.

No, they don't. They get tax relief at their marginal rate. So, someone earning £50,000 will get part of their tax relief at 40% and part at 20%.
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If you read my posts I am very aware of that. I'm not sure exactly what you are trying to score here.

As already covered, the Lifetime Allowance isn't capped, and nor should it be restricted too. The Lifetime Allowance doesn't cap available tax relief - that the annual allowance. Pensions already have input restrictions via the annual allowance, just like ISAs. ISAs do not have a capped upper limit, a limit which is more impacted by investment growth more than anything else, but pensions do. The lifetime allowance for pensions should be scrapped completely - there's absolutely no justification for it.
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The lifetime allowance does indeed provide an inherent cap to tax relief. I have no idea why you think it doesn't. There is a very good reason why it exists. I can only receive so much pension tax relief in my lifetime until I reach my allowance.

Tax relief, by its very nature, is relief from tax. In the case of pensions it is relief from income tax. Make both a flat rate, and I can see the argument, otherwise no. There's already huge distrust in the political tampering of pensions - just look at the huge withdrawals from pensions since pension freedoms were first announced in 2015.
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Why do both need to be flat rate? Tax relief is relief from tax I agree. No one says it has to have the same rate. There has been withdrawals because it was far too tax efficient for the more wealthy and higher earners.

SpeedFreak said:
This only makes sense in a world where tax is applied at a flat rate and not progressively like we currently have in the UK. Otherwise what is fair is quite frankly just a case of interpretation. Often (granted not always), fair is a term used to justify taking more from those who studied, worked hard and planned ahead to subsidise others who were unwilling to or lack the discipline to do so.
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I disagree. You don't have to completely provide relief at the marginal rate of tax. You can do it partly. There is no reason why they both have to be linked, its completely up to the person making the rules how much relief they want to give.
 
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muon said:
The lifetime allowance does indeed provide an inherent cap to tax relief. I have no idea why you think it doesn't. There is a very good reason why it exists. I can only receive so much pension tax relief in my lifetime until I reach my allowance.
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No, it doesn't. The lifetime allowance applies to the pension fund in it's entirety - contributions, tax relief and subsequent investment performance. It does not cap tax relief - that's the annual allowance, that limits tax relief on contributions. For example, in 2010 the annual allowance was £255,000. Therefore, with a combination of maximised contributions and shockingly poor investment performance, it was entirely possible to claim tax relief over and above the lifetime allowance.

The lifetime allowance is a cap on the size of the pension, not the amount of tax relief reclaimed. Even with the lower current annual allowance, you can still quite legitimately pay over £1 million into your pension and not exceed the lifetime allowance. That's why it is a non-sensical limit. I could pay £40,000 into my pension today, reclaim my higher rate tax relief, and with great investment performance still exceed the £1 million cap by the time I retire and be taxed for the privilege. I could make the same investment into my ISA over 2 tax years and receive no such tax penalty for the same investment performance.
 
The_Abyss said:
No, it doesn't. The lifetime allowance applies to the pension fund in it's entirety - contributions, tax relief and subsequent investment performance. It does not cap tax relief - that's the annual allowance, that limits tax relief on contributions. For example, in 2010 the annual allowance was £255,000. Therefore, with a combination of maximised contributions and shockingly poor investment performance, it was entirely possible to claim tax relief over and above the lifetime allowance.

The lifetime allowance is a cap on the size of the pension, not the amount of tax relief reclaimed. Even with the lower current annual allowance, you can still quite legitimately pay over £1 million into your pension and not exceed the lifetime allowance. That's why it is a non-sensical limit. I could pay £40,000 into my pension today, reclaim my higher rate tax relief, and with great investment performance still exceed the £1 million cap by the time I retire and be taxed for the privilege. I could make the same investment into my ISA over 2 tax years and receive no such tax penalty for the same investment performance.
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Lol, there is no cap on the size of the pension fund. It is a cap on relief.
 
The problem for the government is that if they reduce higher rate taxpayers allowances, the NHS will have to make more contributions to achieve the defined benefits of hospital doctors, consultants, senior nurses and managers. Or these people will just have to swallow a lower pension, which I imagine will be framed as another attack on the NHS.
 
SpeedFreak said:
Quite clearly you are free to build a pot in excess of £1m, the restrictions are on the tax obligation should this happen.
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When you withdraw funds from a pension you get a certificate confirming the use of your Lifetime Allowance (LTA). Anything above the LTA limit is taxed at a penalty level of at least 55%. So while you can legally put money in above the LTA there is no reason to do so.
 
indeed, a "pension" above the lifetime allowance isn't particularly useful

I think with the introduction of the cap then someone who might have been on course for a large pension and been looking to say invest in commercial property in say a SIPP would be better off just forgetting about the pension wrapper and wrapping it up in a ltd company... letting it grow and then taking dividends or perhaps it is possible to sell the whole property portfolio/company company at retirement and grab all the loot in one go via entrepreneur relief at 10% etc..

the lifetime allowance isn't technically a 'cap on relief' (the amount of tax relief anyone gets is quite variable), if your investments completely bomb then it is entirely possible for you to have had relief on contributions exceeding the cap and conversely if your investments do really well then you might not have had much relief at all... maybe you manage to turn your 100k pension pot into 1million through savvy investing over a couple of decades... well you've only then had relief on 100k of contributions (obvs you've benefitted from other aspects of the pension wrapper like CGT exemption on the investments too etc..).
 
The lifetime allowance only applies when you crystallise your pension. Look into Uncrystallised funds pension lump sum (UFPLS) as a way to get around this problem, it means your SIPP has to remain invested but this doesn’t have to be high risk.
 
dowie said:
indeed, a "pension" above the lifetime allowance isn't particularly useful

I think with the introduction of the cap then someone who might have been on course for a large pension and been looking to say invest in commercial property in say a SIPP would be better off just forgetting about the pension wrapper and wrapping it up in a ltd company... letting it grow and then taking dividends or perhaps it is possible to sell the whole property portfolio/company company at retirement and grab all the loot in one go via entrepreneur relief at 10% etc..

the lifetime allowance isn't technically a 'cap on relief' (the amount of tax relief anyone gets is quite variable), if your investments completely bomb then it is entirely possible for you to have had relief on contributions exceeding the cap and conversely if your investments do really well then you might not have had much relief at all... maybe you manage to turn your 100k pension pot into 1million through savvy investing over a couple of decades... well you've only then had relief on 100k of contributions (obvs you've benefitted from other aspects of the pension wrapper like CGT exemption on the investments too etc..).
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Remember it is also a relief on dividends and capital gains. Something easily overlooked.

Yes ISAs provide relief on that but there is no income tax relief originally. I would also argue £20k allowance increase is too high, but that is a different debate.
 
dowie said:
see the last line of my post - 'CGT' refers to capital gains tax, that isn't something I've overlooked
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Yep my post was badly phrased. I was trying yo bring that out as a key point. Someone is still getting tax relief similar to £1m of contributions. It is just dividends and capital get reinvested immediately.
 
Hikari Kisugi said:
Also there seems to be an opinion that exists that those over fourty had it easy.
I think folks have missed a generation somewhere.

Someone who is fourty, who bought at the age of say 25, has resided in a house boom and crash that negated any net benefit from housing. We have had a ten year period where wages have barely increased.
People at fourty are not significantly better off that those at 25.
They,ve also started working when most pensions kicked in at 60, yet now find, certain if it is a govt scheme, that they won’t receive their pension until stat, which for them is now 68.

At least those at twenty can have a bloody good idea that they’ll be working to 70. Rather than assume they will retire with their pension when they expected to.

I think any gap or division is set more for those who into their fifties, likely 55 and above.
They will find it hard to find a tax solution for the older groups that doesn’t smash the middle - yet again...
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The opinion that over 60's had it easy is baloney. I remember my mother hand washing clothes in the sink I remember when she got her first washing machine and the over the moon reaction. The first cars were complete piles of junk it took 10 minutes to get the thing started with clouds of blue smoke billowing down the street. We didn't get a newish car until i was almost a teenager and that was supplied by the company and dad had a decent office later managerial position. Sure they he has a house in Spain now and neither are badly off but it came from steady work and paying into the pension pot over the years the idea that it somehow fell into their lap, well i can only put that down to jealously from the younger generation who want a house, car, all mod cons by the time they're 21. Even people living on benefits will have a washing machine and very likely a car too they're far better off than my parents were at a similar age and they were working. Its all relative.
 
Yes the world has indeed changed.
I lived in the same time period you described.
It is a fact people are expected to work longer now, this has changed during their careers, this did not change for those alreafy retired.
And people view certain generations as having it easier, however that was not my point.

If the chancellor is planning to penalise the later age workers, to benefit the younger age workers, it will only seek to penalise thise who have already been penalised.
There is no suggestion of penalty for those already retired.
 
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