I got a letter in the post today concerning my personal pension. As far as I can make out, the upshot of it is:
1) The maximum pension I can draw (from the next re-valuation of my SIPP fund, that happens to be now) has been reduced by 17%. I just got a 17% income cut.
2) I don't have to buy an annuity when I am 75.
3) When I die, the inheritor of my pension fund has to pay 55% tax instead of 35%, a hike of 57%.
4) The inheritor can inherit even if I die after 75 whereas they couldn't before.
I might be being cynical, but it seems to me that:
1) In reducing the amount that I can take out of my pension, the government are increasing what will be left when I die, thus increasing their potential tax revenues.
2) What is left when I die will be taxed at a higher rate, increasing their potential tax revenues.
3) Perhaps they are hoping to increase their potential tax revenues, in that if I don't buy an annuity there might be some money left in my pension fund when I die that they can tax, whereas an annuity turns into a pumpkin when I die and thus produces no tax.
Is there a theme here? Do not rely on this blog post for financial advice. Do not make any decision based on the content of this blog post. Have a nice day.
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2 comments:
Which Government - England of France? Don't recognise / understand the 17% reduction - and sadly I know lots about pensions. I was going to do some plain English posts on them but I knew I'd just rant at what has been allowed to happen to the system and the inequity of public sector pensions
My pension is managed by the UK government, and is a Self-Invested Personal Pension. The maximum amount I can take out each year has been reduced from 120% of what an annuity would generate, to 100%, i.e. a reduction of about 17%.
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