The Covid 19 pandemic has taken the globe by storm. Something we never saw coming, didn’t react to quick enough and resulted in many lives being lost has caused havoc over the last 18 months or so. Here in the UK we have spent an awful lot of taxpayers money to help get through the pandemic. It is now being reported that a pension raid will help to pay for that money! What does that mean and how will it affect you?
What Is A Pension Raid?
A pension raid is exactly what it sounds. The government changing up the rules to raid your pension pot. Making legal changes will be alter how much money you will get when you get to pension age.
Tax Relief Changes
It is being suggested that there will be changes on the tax relief of pension contributions. The change would drop the tax relief to 30%. Meaning that those who pay 40% or 45% income tax will lose out on money. This could result in people being tens of thousands of pounds worse off.
Lifetime Allowance Changes
Currently, there is a lifetime allowance in place which means you can put up to that amount into a pension pot, tax free. The exact figure is £1,073,100, but the changes would see that dropping to just £800k. That’s a huge drop of over 20%. That would be that anything above that would be taxed. A 20% tax on the difference would be over £50k!
Employer Contribution Tax
If you are in a job and pay into your pension, your employer also pays in. There are talks about a tax coming into play on those employer contributions. Literally anything that was once good appears to now be being eyed up for a tax.
How Will It Affect You?
These are just a couple of potential changes that are coming and the amount it will affect you will vary across the board. The money that we ‘found’ for the pandemic was always going to need paying back, however people will not be happy if their futures are being played with via a pension raid.
Boris, Rishi & The Other Big Wigs
There have been reports of tension between Boris Johnson and Rishi Sunak, because of the way Boris spends public money without talking to Rishi before hand. When you have a leader who is spending hand over fist, the man in control of the finances will no doubt start getting annoyed. The problem is, it will likely not affect them. It will affect the average person on the street. Those without trust funds, those that work hard for many years. Those that had big plans for the amount they put aside and will be upset that those plans will now be changed.
Conclusion
We work so hard to have a stable and secure retirement and when the government starts changing things, people understandably become upset. I can that people will start getting annoyed when their pension pots are possibly going to have hands dipped in. We need to start looking at tax efficient schemes such as ISAs and maximising the amount we can put into those every year. Where is your money? How can you control more of how much you keep and hang onto more of your cash?
What do you think of this potential pension raid?
