Pension lifetime allowance changes

Morning all,

What are people’s thoughts around the changes to pension lifetime allowance (removing the cap that has been steadily declining) and raising the amount that can be contributed annually?

I’m speaking with a journalist at the FT who is interested to hear from savers whether this change is going to change anything about how they invest for the future.

Best,
Alex

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Literally zero impact on the likes of me, who cannot muster up £40K a year to put in a pension, never mind £60K, so reaching that limit was not realistic. Even if I’d started back when I was 18 it was beyond my means.

The only people who this helps are people who can afford to put a “spare” £60K away per year.

Conservatives gonna Conservative, innit.

*insert not-shocked-emoji here*

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I’m not exactly sure who it’s meant for? The super rich?

I’m not exactly poor, and the pension change basically has zero effect on my life. The government is still taking tonnes of my money via tax.

So… I don’t know who it’s for?

Just on the face of the change (and I could be wrong), it seems like the change basically allows the wealthy to put away large sums of money into their pensions and retire early. While the average worker will never reach the £40k/y contribution limit, never mind the now £60k/y

The change seems tone deaf and designed as another tax break for the rich. And I’m not usually one to talk like that :smile:

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I’m in two minds on this one.

On one hand, I can see the logic. If you’re a doctor, for example, and you hit the cap, it removes an incentive to continue working. However, on t’other, it feels like a bung and I’d rather a focus on those on low incomes.

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Because of claiming the tax back? But how is there an incentive to stop working now? you need an income until you reach retirement regardless. You can fill up an additional 20k a year in an ISA to take tax free in the future. There’s no scenario where you make more money working less regardless of tax bracket.

The major issue seemed to be that some consultants (medical) were hitting the lifetime cap rather than the annual caps making it not “worth” them continuing working.

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Yeah, I was referring to the lifetime cap. While I am sympathetic, I’d much rather this went towards lower-paid health and social care workers.

The budget had little to say about striking workers nor the crisis in social care funding.

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Yep thats how i saw it. The annual allowance increase great for the rich but it was mainly trying to solve the issue of the lifetime allowance causing consultants to stop working. Theres so much pressure on the NHS and supply of staff so its hopefully going to help keep consultants working till closer to retirement age

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Ok so that just reads like a handful of old rich folk won’t work if they have to pay tax.

I get it… but then again, that sounds like a problem of having a lack of young doctors that care. So the whole thing sounds tone deaf to the larger issues for the average working person

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This consulant line could be regarded as spin by the Tories too. I’m sure doctors will make up a relatively small subset of those who will ultimately benefit.

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Another issue they didnt address is that most of UK pensions are invested in global stocks. They should think of a way to encourage investments in UK companies. This is a very difficult problem to solve though as ultimately you need to guarantee a high rate of return

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Yeah, I do get it.

To be honest they could have justified the change, but without considering everyone else it feels off.

The amount of people who’d benefit from this kind of change in Scotland for example is minuscule.

And while this small percentage of top earners are receiving further tax breaks, the lower income earners are receiving…. Zero tax breaks. They may have frozen some taxes but a freeze isn’t lowering the thresholds like they’ve done with pensions

I’d love to have seen better incentives to contribute to pensions for low earners. While they’ve uncapped pensions for the super rich, poor people are still in 2023 deciding to stop contributing to their pensions because they can’t afford it or they don’t understand why they need it.

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Nobody here has 60k to put into a pension a year im sorry

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Kick starting the economy by giving those with massive piles of cash the opportunity to increase their massive piles of cash.

Increase the LTA I agree with, increasing the annual allowance I don’t.

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That’s not an actual issue. We all just buy off the secondary market, so neither global nor UK companies would profit from investment through the secondary market.
Returns are never guaranteed, that’s the whole thing behind investing - risk/reward.

There is a lot of tax incentives for investing directly into small UK companies already. EIS for example. You can also invest via VCTs (e.g. via Octopus) which directly invest in small British companies with large tax benefits.

/offtopic end

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This is Conservative nonsense thinking. The reason for the change is to attempt to stop doctors from flooding out of the NHS, as they feel forced to retire as their pensions top-out.

This is incorrect though. Knowing people in the profession, the major factor is workplace stress and ill-health caused by an underfunded NHS, an ageing population, a lack of trained professionals caused by underfunded university education and ill-health caused by pandemic (ongoing btw). Oh, and a bit of Brexit, not enough migrant staff.

The recent Lane, Clark and Peacock report on economic inactivity (BBC article linked below) suggests that people are leaving the work because they are not getting adequate healthcare in a struggling (underfunded and under-staffed NHS). If my health conditions go untreated (as I am feeling the effects of right now) I end up having days off work - or may have to retire completely through disability.

And the actual report.

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Spot on.

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I would have thought this mostly applies to people in defined benefits schemes, not people saving in SIPPs. There will of course be some SIPP holders who have > £1m in their pension pot, but it must be very rare. Sort of an odd topic for discussion here IMO as a result. Does freetrade have any at all in this position of being near the old lifetime allowance?

I agree with others there is no incentive to stop working just because you pay a bit more tax on your pension contributions and this is not the reason people retire early. People stop working in the NHS because of the shocking state of the service, chronic underfunding and a hostile government constantly undermining NHS workers after their sacrifices during the pandemic (for example attacking Doctors and Nurses calling them greedy). So this is a very odd measure from the government which won’t have the intended effect.

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Agree with your point but a lot of non Tories are doctors etc and will also love this. I would say more a rich thing than party.

According to Damien, the allowance change does help some doctors.