The 2017 Budget from the Chancellor Philip Hammond will take place this Wednesday. In practice, few are expecting him to deliver anything significant. He has already publicly stated that there will be no “spending sprees” which is a rather unhelpful relative term, but would imply that there is unlikely to be a considerable amount of money for sectors that probably need it.
There are lots of things that I wish he would change, but I am sounding rather like a broken or at least well-worn record, that the rules around pensions are more than a little bit daft, but utterly insane – but hey, this is Government policy not common sense.
As a brief reminder of the pensions insanity. You are restricted to how much you can pay into a pension each tax year (called the annual allowance). This is currently £40,000 or 100% of your actual earned income, whichever is the lower figure.
The UK has a system where you are penalised if your pension pot exceeds a certain value (now £1million) this is called the Lifetime Allowance. You are also penalised if you earn more than £150,000 and begin to see the reduction of your annual allowance from £40,000 to £10,000. This is called pension taper relief, catchy sounding term isn’t it! Tax penalties are ready and waiting should you mess up, many will – through nothing deliberate, other than earning and income and being a member of a pension scheme, something that one would normally think were good things to do. Just for good measure your pension is valued at the point you “retire” (though in their infinite wisdom this is now called a crystallisation event) and then again at 75 with assessment against the Lifetime Allowance, which may well result in a significant tax payment – or rather it will if you exceed the Lifetime Allowance of the day.
Doctors, Teachers and Measure for Measure
Those that are members of final salary pensions like the NHS, Civil Service or Teachers Pension Schemes – basically anyone that works for a State service, which is likely to benefit us all. You possibly know someone who works within in the NHS or a Teacher, who has had increasingly pressurised workloads, with extended hours and utterly pointless assessments, form filling (for which read, Government department bureaucrats need to measure something, so let’s try this) all simply to justify their non-inflated salaries, which on occasion they have to reapply for… all because a Government can. Anyway, as these people are clearly coping too well and not leaving in the numbers that Government hoped, they are asked to calculate their annual allowance rather differently and constantly guess if they will overpay for the year, which results in a tax fine that on money that they might not receive when then retire. I am not kidding – this is not fake news.
Hollow Words, Smoke and Mirrors
When Chancellors and Prime Ministers or indeed any politician talks about serving people, one is always left suspicious as the words are invariably bereft of any action plan or follow through. There are few like the Duke, in Measure for Measure, who survey the detail of the way their citizens are governed. We all plod on regardless because the problems are apparently “just too big to fix” and “we must all have a grown-up debate”… hmm..
If Government was a business it would be in an even worse shape, for failing its customers so frequently and so outrageously. Yet whichever one is elected, they make the same empty promises and simply meddle along, tinkering at the edges hoping that everyone will quickly forget, which they will…
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 firstname.lastname@example.org