Shock pension changes and how they could impact you

The changes to pensions announced in the budget today are not just for the very well off. In this video I cover how the changes could also impact you.

In a surprise move, the lifetime allowance (LTA) has been abolished completely and the annual allowance has increased from £40,000 to £60,000

I’m sure like me, most of you are nowhere near this amount given the size of the average pension pot in the UK. But more and more people were being caught in this tax trap.
The changes to the annual allowance could help you reach your financial independence target sooner.

timestamps
0:00 intro
0:22 the impact of rising the LTA
1:14 how many people were impacted by the LTA?
3:28 the tax impact of the LTA
5:29 the increase to the annual allowance
6:37 why these changes now?

[Marten_t]

Amazing video, A friend of mine referred me to a financial adviser sometime ago and we got to talking about investment and money. I started investing with $150k and in the first 2 months, my portfolio was reading $274, 800. Crazy right!, I decided to reinvest my profit and get more interesting. For over a year we have been working together making consistent profit just bought my second home 2 weeks ago and care for my family.

[C-L]

Great explanation, thanks, worked hard all my life and saved hard to have a great retirement then they froze the LTA! I was fuming as planned for it to increase with CPI, now happy again but will need to start taking my pension if the rules are reversed, I wish they would stop messing about with the tax rules on long term investments.

[brianpearson]

I agree with Mark Findlay. These changes are for the people who earn a higher wage and therefore can save more into their pension pots. For a majority of workers, with the cost of fuel, food and mortgages increasing fast, there will be little chance in them saving for a more comfortable future. In those terms, the changes will only allow the rich to get richer and the potential divide between those who have and those who do not, will widen.

[Hiram]

Same here Dianne, I have nowhere near 1M in my pension pot. Only about 10k people actually do.

The state pension is taxable, so a small occupation pension and the state pension combined and you will be paying income tax. And add fiscal drag.

[powellj]

Hello Dianne great video, I am nowhere near the LTA and frankly I doubt I would of been near this on projections of my pension value at proposed retirement age so the pension changes in the Budget make no difference to me in my current circumstances.

[petermorris]

The increase in the annual allowance is to do with the fact that you pay an equivalent rate of 60% tax on income between 100 and 125 K and 45 % thereafter. Money paid into pensions is removed from your total pay to reduce your real income. i.e. if you earn 160 K and pay 60 K into your pension, including employer contribution, you become a 40 % taxpayer.

[davidplanet]

Thanks Dianne. My pension value is close to the current LTA so the change helps me. I think the most important change is the increase in the MPAA to £10, 000. This allows people who have already taken flexible income (e.g. drawdown or UFPLS) to go back to work and contribute to a pension. The LTA is staying for 2023/24 but with a zero percent LTA charge, then it will be abolished from 2024/25. I think once that happens it will be difficult to reverse the decision and bring it back.

[LorenaG.Cresswell]

We are already in the big crash, Inflation is a catastrophe. This CPI report is a colossal failure. To bring the housing market to a halt, the FED will have to pull all the stops. The unfortunate issue is that other markets are being decimated. If you want to stay green, you have to rely on a lot of diversification. Currently up 14% and being careful. Still a better deal than leaving it in a savings or checking account yielding 0-1 percent interest.

[dazsaz]

LTA Good News, It’s a bit Less to worry about working out how much I would owe in tax for the future

[garycroft]

Personally I don't trust any government not to change the rules again, my guess is that rather LTA that an IHT limit could be applied to pension one day.

From a personal perspective I'm not near the LTA yet, but it was in my mind to slow/stop contributions in about 5 years time if I could max out the annual allowance each year as I would have easily hit the previous LTA at some point before 75, likely in early 60's. Now its one less thing to worry about, for now.

In any case regardless of LTA, I'll know what enough is both from a work and money perspective, when the time comes!

[Hiram]

5:27 I didn't think you were in your 50s, I thought you were quite a bit younger than that.

[markwaudby]

Does anybody know how this affects those people that have triggered the LTA to £4000 per year, are we able to up that amount to say £6000 or has the triggered amount been abolished too??

[sybaritic]

It is good news, but it's better for higher earners, and there are many who won't benefit from this change but unfortunately will be hit by stealth measures such as as the allowance freeze.

[markfindlay]

Just for rich people, to get a bit richer!
I would have liked to see more tax relief for small earners without hurting their pockets.

[ronlittlewood]

Once again =1 law for the rich & 1 law for the poor, How the hell did this government get in power

[jennyli]

In your opinion what do you think is the likelihood that the government pension in U.K. will no longer be around due to the high cost and whispers of it being unsustainable for the government?

[michaelc]

Who the hell would have that k kind of pensions no one .