She pointed out that the value of an annuity is determined by the stock and real estate markets, and that investors should “have an opinion.”
“It’s not a pension for everyone and wealth for everyone, but if this doesn’t make pensions attractive, it means nothing,” she added.
Contributions to the pension pot are boosted by tax cuts at marginal rates. In other words, the 80 pence saved by the basic rate payer automatically replenishes him to £1. For higher rate payers, this is even more generous: a £1 annuity is effectively only 60p. Annuities are a great incentive because they pay taxes on
There are other perks, made even more generous as a result of the prime minister’s intervention: unlike Isa, money left in pensions is usually not subject to inheritance tax.
Normally, individuals can pass £325,000 worth of property to descendants tax-free, with a 40 per cent fee. Additional allowances to cover the family home and the marital exemption increased its value to £1 million.
However, annuities typically do not include IHT, and the value of this tax break was previously limited by lifetime benefits. Its deprecation makes this an almost unlimited optionInstead, beneficiaries are taxed on inherited pensions like any other type of income. For non-income or low-income earners, this could mean that the pension is completely tax-free.
pardon for the middle class
Labor has dismissed Mr Hunt’s pension reforms as “tax cuts for the wealthy”. promised to overturn it if he won the next election.
However, NFU Mutual’s analysis suggests that this is somehow off the market.
Assuming someone saves a pension each year for a 40-year career and achieves a not-too-optimistic 5 percent annual return, you don’t need a top 1 percent salary to achieve the old lifetime benefits.
For example, someone with a salary of £53,350 (wealthy but not in the top 10 per cent) would only need to contribute 7.5 per cent to reach £1 million .
A person earning £80,000 needs to save just 5 per cent.
Pensions expert Martin Ansell at NFU Mutual said: ‘It sounds like a £1million pension is out of the question for most people, but with automatic enrolment and higher wages to keep up with inflation, it could be much more in the future. It will become commonplace.
