https://t.co/mDRuoSUxI1 Reeves may not be targeting contributions but she has plenty still to go at in pension wealth – inheritability and tax-free cash.
— Henry Tapper (@henryhtapper) October 7, 2024
The proper use of tax incentives for pensions is to encourage saving on the way up and spending on the way down with the pivot point being that stage in life when you start living off your savings rather than your earnings.
Philosophically it does not seem right to decrease incentives to save by reducing tax-relief on personal contributions or adding national insurance to employer contributions. That is a disincentive to save. It does make sense to require pensions to be spent and to be spent over a lifetime rather than upfront (through tax-free cash) or as a bequest.
We do not mandate personal pension saving, we coerce it with the auto-enrolment nudge. We spend money encouraging people to defer pay so that they do not do harm to future generations who pay for their fecklessness. I agree here with John Stuart Mill.
We have no responsibility to those wealthy enough to have an IHT liability to offer them mitigation through tax-incentivised saving and attractive as Lamborghini purchasing tax free cash offers are, we have no obligation to offer them to those withe (say) more than £400,000 in their pot.
Abolishing IHT exemptions for those who die with a pot under 75, limiting tax-free cash to £100,000 are both wealth not saving taxes and – painful as they are to the wealthy – they are not doing harm, only reducing relative wealth.
As Rachel Reeves options diminish, so the likelihood that wealth rather than savings is taxed.
The window for those with tax free cash in excess of £100,000 is closing and may already be closed. Pension Companies over the weekend were reporting a surge in claims for cash from those who believe they can forestall a potential loss of capital.
I am quite sure that these rumours are being underplayed, for commercial and operational reasons.
I am not advising those who have large tax-free cash entitlements to act, but will advise that – based on my experience – if you are going to act – get going.