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Assuming LTA is here to stay
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bingo
Posted: 17 March 2023 08:22:26(UTC)
#1

Joined: 28/10/2019(UTC)
Posts: 118
Hi

Assuming in 3 years' time the LTA is in place and is approx £1m.

It's possible I'll be retiring in 2026 (although plans can change).

If your SIPP was 100% equity/bonds and reached £1m during the next 3 years would you look to convert all to cash/money market fund and invest additional contributions in equities/bonds ?

With a plan to crystallise the £1m at retirement age and invest this in equities/bonds for a retirement income. Leaving anything above the LTA to be invested and worried about when/if I hit 75.

I'm trying to reduce sequencing risk when crystallising the SIPP. Any other approaches ?
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Thrugelmir
Posted: 17 March 2023 15:59:50(UTC)
#2

Joined: 01/06/2012(UTC)
Posts: 5,333

Thanks: 3258 times
Was thanked: 7898 time(s) in 3272 post(s)
I'd be more concerned with current issues such as whether there's going to be a global recession, interest rate levels, rate of inflation etc than what the LTA will be in 3 years time. After a General Election as well. Start positioning your portfolio now if you've reached your financial objectives, i.e. derisk.
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2 users thanked Thrugelmir for this post.
ANDREW FOSTER on 17/03/2023(UTC), Guest on 18/03/2023(UTC)
bingo
Posted: 17 March 2023 22:22:34(UTC)
#3

Joined: 28/10/2019(UTC)
Posts: 118
Hi

Thanks for responding. So put all £1m (ish, not quite) in money market funds now for the next 3 years.

Then, at retirement, crystallise everything under LTA (if no LTA then crystallise the lot) and put 75% in equity/bonds to generate retirement income.

I'm wondering how sequencing risk works for people who aren't buying annuities and are relying on the portfolio for income.
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ANDREW FOSTER
Posted: 17 March 2023 23:25:16(UTC)
#4

Joined: 23/07/2019(UTC)
Posts: 8,125

Hunt has pulled a clever move with the LTA.

It seems that reaching the limit was leading many senior medial specialists to leave the NHS on reaching their LTA and suddenly facing a large apparent increase in taxation.

This move significantly makes 'carrying on working' more attractive and is a big boost for the NHS.

This affects tens of thousands of staff each year and will improve retention at a critical period.

I'm going to have give nod to this.
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SoBo65
Posted: 18 March 2023 10:44:33(UTC)
#7

Joined: 04/04/2020(UTC)
Posts: 107
I would probably move the tax free lump element into cash/bonds for sure. As an aside, I have been buying GACA /GACB irredeemable pref shares yielding about 6.85% pa could also been viewed as an annuity proxy
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Isaac J
Posted: 18 March 2023 11:22:16(UTC)
#5

Joined: 25/05/2022(UTC)
Posts: 299
ANDREW FOSTER;261266 wrote:

Hunt has pulled a clever move with the LTA.

It seems that reaching the limit was leading many senior medial specialists to leave the NHS on reaching their LTA and suddenly facing a large apparent increase in taxation.

This move significantly makes 'carrying on working' more attractive and is a big boost for the NHS.

This affects tens of thousands of staff each year and will improve retention at a critical period.

I'm going to have give nod to this.


Possibly a stupid question but if they were concerned about the LTA, why would they not just opt out of the NHS pension scheme, carry on working and invest in an ISA or GIA or whatever instead?
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ANDREW FOSTER
Posted: 18 March 2023 11:41:54(UTC)
#6

Joined: 23/07/2019(UTC)
Posts: 8,125
Isaac J;261299 wrote:
ANDREW FOSTER;261266 wrote:

Hunt has pulled a clever move with the LTA.

It seems that reaching the limit was leading many senior medial specialists to leave the NHS on reaching their LTA and suddenly facing a large apparent increase in taxation.

This move significantly makes 'carrying on working' more attractive and is a big boost for the NHS.

This affects tens of thousands of staff each year and will improve retention at a critical period.

I'm going to have give nod to this.


Possibly a stupid question but if they were concerned about the LTA, why would they not just opt out of the NHS pension scheme, carry on working and invest in an ISA or GIA or whatever instead?


Because their payments would likely be taxed at 40 or 45% before they get to pay anything into an ISA.

An ISA is limited to £20K whereas many are maybe paying £40k+ PA into a pension.

A GIA has no tax advantage at all.

Anyone at risk of breaking the LTA get a crippling tax rate for the privilege.
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3 users thanked ANDREW FOSTER for this post.
Jesse M on 18/03/2023(UTC), Isaac J on 18/03/2023(UTC), Toadfish on 22/03/2023(UTC)
Charlie P
Posted: 19 March 2023 17:02:20(UTC)
#8

Joined: 14/03/2023(UTC)
Posts: 1
NHS opting out of pension means loss of death is service benefits as well.
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Joe 90
Posted: 21 March 2023 17:44:58(UTC)
#9

Joined: 14/01/2018(UTC)
Posts: 310
I moved my SIPP into drawdown a couple of years ago, taking the 25% lump sum. I draw only £12,500 a year and therefore pay no income tax. Prior to the budget I was concerned that growth of the drawdown pot could breach the LTA in a few years.

In order to reduce the risks of this happening, I put my low growth assets in my SIPP, with my high growth assets in ISAs and my wife's trading account, taking advantage of her non-taxpayer status.

Now that the LTA has gone, this needs some reconsideration.

I suspect a future Labour administration will either leave things alone, or if they do reimpose a new LTA, it will be higher (say £2m). Otherwise, they'll be accused of bashing the doctors.

By coincidence, the CGT relief is due to be reduced to £3,000 in the next 2 years. Accordingly, it makes sense to shift my low growth assets into my wife's account and hold high growth assets in my SIPP.

Clearly there is a fair bit of guesswork and speculation involved with all this. It's perhaps more a shift in emphasis than anything else.

Anyone else thinking along the same lines?
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Toadfish
Posted: 22 March 2023 08:25:59(UTC)
#12

Joined: 04/10/2020(UTC)
Posts: 230

Thanks: 330 times
Was thanked: 458 time(s) in 144 post(s)
Joe 90;261700 wrote:


Now that the LTA has gone, this needs some reconsideration.

I suspect a future Labour administration will either leave things alone, or if they do reimpose a new LTA, it will be higher (say £2m). Otherwise, they'll be accused of bashing the doctors.
e.

Anyone else thinking along the same lines?



There is another option, they bring the LTA down to the level it was and create a separate scheme for important professionals such as medics etc. There's precedence for this as senior judges sit outside of the LTA, allegedly for that very reason. In another words, unless you're in a profession that's deemed vital you'll still be hit. This is what I believe Labour will do when they get into power, it'll make them look like they care about the NHS whilst punishing the rich, which goes down well with the impoverished...
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1 user thanked Toadfish for this post.
Tim D on 22/03/2023(UTC)
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