46 Days To Save Your Pension Savings From The Labour Tax Grab (With Solutions)

This week's video is a call to action as there are only 46 days to protect your pension savings from the Labour tax grab on 30th October 2024.

#financialeducation #financialfreedom #financialplanning #retirement

Are you concerned about your retirement savings? With Labour's proposed pension reforms on the horizon, it's more important than ever to understand how these changes could impact your financial future. From single-tier tax relief on contributions to a reduction in the tax-free cash allowance and new inheritance taxes on pension death benefits, these potential policy shifts could drastically affect your pension wealth. In this guide, we’ll explore practical strategies to safeguard your retirement funds and ensure your financial security.

Single-Tier Tax Relief on Pension Contributions

One of the key proposals under Labour is the introduction of a single-tier tax relief system, potentially set at 30%. This flat rate would replace the current progressive system, where basic rate taxpayers receive 20% relief, higher rate taxpayers receive 40%, and additional rate taxpayers enjoy 45%. While a flat rate might seem fairer at first glance, it could significantly reduce the benefits for higher earners, effectively slashing the tax incentives to save into pensions. If this change is implemented, consider adjusting your pension contributions now to maximize current tax reliefs.

Reduction in the Tax-Free Cash Amount

Another proposed change is the reduction of the tax-free cash lump sum that retirees can withdraw from their pension pots. Currently, retirees can take up to 25% of their pension savings tax-free, up to a maximum of £268,275. Labour's plans suggest lowering this cap to £100,000 or 25% of the pension pot, whichever is lower. This would mean a larger portion of your pension could be subject to income tax, reducing your overall retirement income. To protect your wealth, consider other tax-efficient savings options like ISAs, which offer tax-free withdrawals and could complement your pension savings.

Inheritance Tax on Pension Death Benefits

Perhaps the most concerning proposal is the potential application of inheritance tax (IHT) on pension death benefits. Currently, if you pass away before the age of 75, your pension can be passed to beneficiaries free of income tax. Even after 75, withdrawals by beneficiaries are taxed only at their marginal rate. Labour's proposed changes could subject pension assets to inheritance tax, applying a 40% tax rate on amounts above the IHT threshold. To mitigate this risk, it may be wise to explore alternative estate planning strategies, such as utilizing trusts or gifting assets during your lifetime.

Take Action Now

With these proposed changes potentially reshaping the pension landscape, it's crucial to stay informed and take proactive steps to protect your pension wealth. Review your pension contributions, explore alternative savings vehicles, and consider revising your estate planning strategies. Staying ahead of these changes could mean the difference between a secure retirement and facing unexpected tax bills.

By understanding Labour’s proposed reforms and taking steps now, you can safeguard your retirement savings and ensure your financial future remains secure. Keep up with the latest developments and consult with a financial advisor to tailor your strategy to your personal circumstances. Your pension is a vital part of your retirement plan—make sure it’s protected.

00:00 Introduction
02:16 What are the Three Pillars of Pensions?
03:19 How did Gordon Brown ruin UK pensions?
04:04 What is the state of pension savings in the UK.
04:44 How will single-tier tax relief contributions work?
06:15 How many higher rate taxpayers are there?
07:06 What are the current tax-free lump sum rules?
09:42 How will the IHT rules apply to pension wealth?
11:30 How can I protect my pension savings from a Labour tax grab?

[majorpentatonic]

Thank God I took all my 25% tax-free lump sum last year when I retired. I really feel sorry for people who are about to retire in the near future with all this going on. It makes planning for the future so much more difficult ☹️.

[Mikey_NoCap]

Glad I took my 25% max PCLS when I hit 55 earlier this year. Next steps is to look at IHT planning on what is left in my pot. certainly going to look at earlier, more and sustained gifting to my daughter. It is bonkers that those who have worked long and hard to get themselves in a strong position to be retire early and be self sufficient now have to start playing games to avoid the raiding and changing government pension landscape. I still have state pension mapped into my long term plans for me and the wife, but I fear next steps will be some sort of means tested state pension.

[Misiu]

Labour have done something in their first 90 days which I never imagined to be humanly possible: they have made the Tories look good

[jagman]

So much for focusing on growing the economy instead of taxing us to death. Rachel will have to include the loss of tax revenue from the many who will emigrate because they can and are better off for doing so.

[PaulB-qd]

I'm not paying 40% tax, if they remove the tax relief on pension contributions I'll just drop down to 4 days a week.

[Nordkapp]

Thanks for this, I saw Martin Lewis also couldn't get his head around the cutting of the fuel allowance, now this quandary that requires no pain by the rich and everything landed on the PAYE worker. Madness

[Benzknees]

This'll kill pensions, especially if combined with means testing of the State Pension.

[martinhammett]

So a video on what Labour might do !, just a shame nobody got the hump so much about the tax threshold being frozen for 6 years !

[Terry.W]

Yes we need to act quickly ..this terrible Government is going to tax everything that moves...time to act..

[johnperardua]

When Labour say those with the broadest shoulders they really mean those who work hard all their life and pay tax all their life.

[AndrewHaleyUK]

You'd hope any government can see the long term benefits of stability in this sense. Building trust through sensible incentives for retirement planning. Unfortunately we often see short-minded politics. Here's hoping for a broader vision 🤞

[dar]

If Labour mess with the pensions again then they can kiss goodbye to a 2nd term in Government.

[Chanesmyname]

Labour, the Tory party love you, for they make them look kind.

[rmcl]

NEW SUBSCIBER .... needed to hear this thanks fella

[MrTpain]

Such an easy solution remove tax relief on contributions going into a pension. And at the same time make all pension withdrawals tax free
No tax in and no tax out

[roblloyd]

We all remember Gordon Brown, pension slayer.

[TrishMarshall-bz]

If this happens ..would in come into place before April, as Im concerned ....

[Vanosphere]

Remember when Labour said their spending plans were "fully costed" 🤨

[Llian_C]

I'm generally in support of the single rate for tax relief as there are a lot fewer incentives as a lower earner to save into a pension. It does after all still keep pensions the most effective way to save for retirement and it just means that higher earners are contibuting from the part of their salary that is taxed at 20%, the same as basic rate tax payers.

[onlyme]

As a higher rate tax payer, I don’t have a problem with a flat rate tax relief rate, it seems fair. The 25% tax free cash limit seems low at 100k as a 400k pension pot is below the PLSA’s moderate pension level. Inheritance tax is just crazy anyway but there is already a 75 year age limit on it so suspect they ‘ll just reduce that to eventually equal the pension age.