Government thinking of cutting the LTA, and more.

I see the government have their eye on cutting the LTA.

Considering how low annuity rates are, reducing the LTA will mean some pretty moderate pensioners will feel incentivised to retire early. Instead people will need to think about having a retirement income made up of state pension, personal pension, AND investments/ISAs. The massive hike in ISA limits a few years ago means that some people might choose not to save into a pension, but instead to be taxed now and put the money into ISAs, though international pressure to harmonise tax laws is always pushing to remove ISAs.

I’m just glad I moved as much as possible out of SIPPs and into drawdown when I hit 55, measured against the LTA at the time.

The “pension relief at marginal rate” principle is a way to put some of your pay aside to be taxed as income later in life. If they start changing that principle, pensions might become very unappealing to some people who will effectively be taxed now AND later.

For the state pension triple lock they could just average over the last 3 years for each of the three measures, but I’ve not heard any mention of that. Though I’ve read that the state pension is relatively low when compared internationally, and the triple lock was partly intended to inflate the state pension so it compares better to other countries.

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