Pensions – more needless headaches the Lifetime Allowance

Pensions – more needless headaches

You may recall that Mr Osborne in his great wisdom has decided to reduced the current lifetime allowance even further, just to clarify – the Lifetime Allowance is the value of your pensions, either in payment or being built up. It currently stands at a figure of £1.25million but from 6th April 2016 will reduce to £1million.

It is very easy to calculate the value of your pensions, provided that they are purely investments pensions, such as personal pensions, SIPPs (self-invested personal pensions). You can also exclude the value of your State pension.

However, if you have an annuity in payment or old final salary pensions or perhaps simply a current final salary (or career average) pension (called a defined benefit pension scheme) such as the NHS or Teachers Pension, the sums are considerably more complex.

Long story short, once the value of your pensions has been calculated you may find that you have exceeded the lifetime allowance – which is reducing. So you will need to do something about this, which may well involve some uncomfortable decisions about future membership of pensions, even or perhaps especially, good ones, which is utterly daft.

Another bonkers pension policy

Yes, I did say bonkers. Despite what Mr Osborne may say about helping people to help themselves, he is actually restricting the amount that you can build in your own pension, actively discouraging saving, which does seem to be rather at odds with any historic Conservative policy in history, unless you count the lamentable decision by Norman Fowler to remove the rule that enabled employers to make membership of an occupational pension scheme a condition of employment, allowing the employee to contract out and not join the pension scheme. In fairness to Mr Osborne, with the benefit of hindsight, Mr Fowler probably takes the prize for arguably the most loopy pension decision for generations.

Mr Fowler was under the misguided impression that this brought about freedom for employees to decide if they really wanted to be in their employer’s pension. Mr Osborne can only be motivated by collecting more tax as there are 55% tax charges applied to amounts that exceed the lifetime allowance, unless you have the relevant protection, which is also not really guaranteed.

We are not talking about small sums of money here. So you need to gather your information, for two specific dates 5th April 2014 and 5th April 2016. This creates a headache for you, a massive task for me and in my opinion the lifetime allowance is one of the worst pension ideas in history – penalising both those that save and a successful investment strategy. This is a subject that I will return to frequently before 6th April 2016.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

Pensions – more needless headaches the Lifetime Allowance2023-12-01T12:19:50+00:00

Budget 8 July 2015

Budget 8 July 2015

Following my recent email and Mr. Osborne’s announcements, I am pleased to confirm the following changes and amendments have been made to our App (which is available free of charge for iphone, ipad and Android platforms).

As the 2016/17 rates are being added after the Autumn Statement, there is only one small change to the 2015/16 rates and the change has already been made earlier this afternoon and is live in your App. The change was within the Main Capital and Other Allowances section of the tax tables and related to the change to the Annual Investment Allowance from 1st January 2016 from the previously announced limit of £25,000 to a new limit of £200,000.

On a separate note, the chancellor has, from April 2016, abolished dividend tax credits. This will fundamentally change 3 of the tax calculators so they will need to be changed when we complete our updates prior to the April 2016 budget. However for the remainder of this tax year, all calculators and tax tables remain fully accurate.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

Budget 8 July 20152023-12-01T12:20:16+00:00

George Osborne needs better advice

Even George Osborne has employment rights

If the Government are to make progress with the national finances, then George Osborne needs better advice or perhaps should recall the story of Enron.  His speech at the Tory party conference this morning suggested that his memory of the Enron story was already consigned to history and suggests a lack of understanding about business or people. I’m not referring to his last budget, but the announcement that employees are likely to want to swap employment rights for shares in the company that employs them.  The rights to be given up – unfair dismissal, redundancy and time off for training, which could be swapped for £2,000 – £50,000 worth of company shares, which would be exempt from capital gains tax when sold. The fact that most people do not pay capital gains tax is somewhat lost on him and anyway CGT has a lower rate of tax than income tax, thanks to another blunder by the previous Government.

Employment Law red tape

We are in recession. There are plenty of opportunities for those that wish to find or see them, but it is not always the case that these are within reach of “ordinary people”. Any business looking to use this new arrangement has surely found itself in the position of having too many staff to do the work at hand. The shares will invariably be fairly illiquid and who knows what they will be worth (if anything). Perhaps he should seek advice about amending existing employment law, but not abolishing it. Yes there are lots of examples of silly red tape and “bad” employees, but equally there are examples of very poor employers. His proposals seem to miss the point of share ownership and employee rights and sets a worrying suggestion that the two are opposing concepts and I think that Mr Osborne needs better advice on this.

The Mansion tax

What we do have from Mr Osborne is an announcement of a £10bn cut in the welfare budget and an end to debate about the mansion tax, which is simply a wealth tax. I reckon that Mr Osborne needs some better advice. Look, I’m not in favour of high taxes, I do believe that we need a welfare state that provides for those that are in genuine need, but otherwise people should be incentivized to create and build wealth. I know this is not easy. Of course the rich should pay a fair share, but we all should. Having different rates of tax for different forms of income is daft and results in people finding legitimate ways to minimise tax. Of course, your own opinion may differ radically from mine, but I prefer to believe that individuals should chose how to spend their money not the State (who seem to make a pigs ear of the task – whatever party run the show) and it is a given that we need a good basic welfare state safety net. I still maintain that a single rate of tax is fair to all, yet no politician has the gumption to approach this very simple concept.

George Osborne needs better advice2023-12-01T12:22:58+00:00
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