What caught my eye this week.
The best news this week from the election dog and pony show is that Labour will not reinstate the recently-scrapped Lifetime Allowance for Pensions (LTA).
According to the BBC:
Labour has dropped a plan to reintroduce a cap on how much people are allowed to save into their pensions before paying tax.
Under the pensions lifetime allowance, pension pots over £1.07m faced an annual tax of £40,000 on average.
The cap was scrapped in April but Shadow chancellor Rachel Reeves had vowed to bring it back, saying it could raise £800m a year.
However, her party has now reversed the decision ahead of the release of its manifesto on Thursday, reportedly because the cap would add uncertainty for savers and be complex to reintroduce.
Of course the BBC momentarily gets the LTA wrong – it’s not a cap on savings made, but rather on the total size of your pot before additional taxation kicks in – but that’s all in the rich tradition of confusion about this cursed legislation.
A lifetime of muddle
When Chancellor Jeremy Hunt first announced he’d abolish the LTA from April 2024, Reeves called it: “the wrong priority, at the wrong time, for the wrong people”.
But the LTA itself was a cumbersome shape-shifting bundle of contradictions, which surely did the pension regime more harm than anything it sort to redress.
Even in death it’s a pain in the arse. Last month the FT reported thousands of investors with large pension pots were in limbo due to sloppy legislation:
Though the Conservatives scrapped the lifetime allowance in April, errors in the legislation affected people who relied on the enhanced protection arrangements giving them the right to take out more than £375,000 in tax free lump sums.
In April, HMRC advised those savers to consider delaying their retirement plans until the rules were corrected.
Fortunately Labour now says it won’t add to this confusion.
A welcome dose of common sense which we could do with by the truckload after the fantasy politics of the past eight years.
Seven-figure sticker shock
Indeed, it’d be nice to think Labour’s change of heart marks a new era of pension stability.
But I wouldn’t bet the farm.
Many Labour supporters will still take umbrage at the seven-figure pension pots being ‘favoured’ by the scrapping of the LTA. They won’t think too hard about what size of pots would be required to deliver some of the public sector’s defined benefit pensions either.
So something may yet be done in the quest for ‘fairness’.
In reality, pension income is taxed. Those enjoying a very large pension income – whether from the private sector or the state – will be paying higher rates of tax anyway.
Possibly enough to neuter much of the tax deferral benefit of pensions.
Death is not the end
Where I do find the pension regime too generous is in pensions’ transformation into a vehicle for bypassing inheritance taxes.
Those who die before they reach 75 can pass on a pension free of income tax for beneficiaries. The latter can be heirs who did nothing to earn that money. And here I deploy my usual argument that I’d rather tax them than working people.
With all parties promising us wonderful things funded on the back of ‘closing tax loopholes’ – loopholes apparently left wide open by a cash-strapped State for many years, but there you go – maybe that’s where Labour will look instead?
For now though, the end of uncertainty about the end of the LTA is good news – if a mouthful – and good politics.
Have a great weekend!
From Monevator
Is it time to ditch index-linked bond funds? – Monevator
You don’t have to go nuclear on the idea of working for a living – Monevator
From the archive-ator: How to construct your own asset allocation – Monevator
News
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LSE to boost retail offer with PrimaryBid deal – Sky
UK mortgage arrears hit an eight-year high – FT Advisor
Wales has the worst rate of economic activity – BBC
London house building craters, UK pipeline lowest since records began – CityAM
Thailand is seeking digital nomads – Sky
Post-Brexit ‘mess’ as Italian driver’s lorry held for 55 hours at UK border post – Guardian
Britain’s economic growth has been flattered by a booming population [PDF] – Resolution Foundation
Election selection mini-special
Money aspects of the manifestos – Labour, Tory, Lib Dem, Others
There’s a huge Brexit-shaped hole in this election – Guardian
How the Tories learnt to love taxing the rich – This Is Money
Lib Dems pledge to rejoin EU’s single market in manifesto ‘to save the NHS’ – Sky
SNP’s Stephen Flynn attacks Labour’s North Sea energy plans – BBC
Even Surrey’s middle classes are angry with the Tories – Guardian
Do the parties’ spending promises stack up? – CityAM
Products and services
Get cheap tickets by filling empty seats at shows – Be Clever With You Cash
Co-operative Bank launches a new £150 switch deal – Which
Sign-up to Trading 212 via our affiliate link to claim your free share and cashback. T&Cs apply – Trading 212
Is a five-year fixed mortgage now the best option? – This Is Money
185,000+ savers penalised when accessing Lifetime ISA access – This Is Money
Open an account with InvestEngine via our link and get up to £50 when you invest at least £100. T&Cs apply. Capital at risk – InvestEngine
How to switch bank accounts again and again – Be Clever With Your Cash
PrettyLittleThings faces backlash after scrapping free returns – BBC
Where the average house price buys the most square feet – This Is Money
Homes for sale for cyclists, in pictures – Guardian
Comment and opinion
Wealth and money are two different things – Darius Foroux
Does it make more sense to rent or buy in the UK? [Search result] – FT
Young women are telling each other to ‘date rich’. How terrifyingly retro – Guardian
The cost of living: then and now – Getting Minted
Why you’re probably not missing out on hedge funds – Humble Dollar
Champagne wishes and caviar dreams – Josh Brown
Father time is undefeated – Abnormal Returns
Horseshoes and hand grenades – Fortunes & Frictions
What is enough? [Podcast] – The Long Game via Apple
TIPS and your portfolio [US but interesting] – Morningstar
US market concentration mini-special
Top 10 companies in S&P 500 now make up a record-high 35% of index – Apollo
More: how worrisome is US stock market concentration? – Cullen Roche
Tech -> Big tech -> Huge tech – Sherwood
200 years of market concentration – Global Financial Data
Naughty corner: active antics
Are Diageo shares a buy after their 35% decline? – UK Dividend Stocks
Private equity is being overwhelmed by too many rich people – Semafor
The man whose podcast helped him start a $100m hedge fund – efinancialcareers
How often is too often? – Investment Talk
Kindle book bargains
A Man for All Markets by Edward O. Thorpe – £0.99 on Kindle
Doughnut Economics by Kate Raworth – £0.99 on Kindle
Taxtopia by The Rebel Accountant – £0.99 on Kindle
The $100 Startup by Chris Guillebeau – £0.99 on Kindle
Environmental factors
The unsustainable hype around ESG [Search result, bait-and-switch headline] – FT
In ever-hotter US cities, air-con is no longer enough – Guardian
A ‘halo effect’ drives demand for sustainable and impact investments – Alpha Architect
What is the opposite of oil drilling? – The New Yorker
How parakeets escaped and made Britain their home – Guardian
Robot overlord roundup
Music just changed forever – Persuasion
Apple’s AI moment arrives… – Platformer
…with its artificial approach to ‘Apple Intelligence’ – SpyGlass
Situational Awareness… [PDF, on imminent AGI] – Leopold Aschenbrenner
…and a rebuttal of sorts [Video] – Sabine Hossenfelder via YouTube
Off our beat
The big British bamboo crisis – Guardian
40 years on: The Battle of Orgreave remembered – BBC
A month without a smartphone – Collab Fund
‘I used to run a popular newsletter. Then things started getting weird’ – Slate
Russian propagandists’ hopes for America – Timothy Snyder
If you don’t see these movies now, you never will – Slate
Do who you are – Humble Dollar
China is losing the chip war – The Atlantic via MSN
Nobody knows what’s going on – Raptitude
Tributes to Michael Mosley: 1957-2024 – BBC
And finally…
“Things that have never happened before happen all the time.”
– Morgan Housel, The Psychology of Money
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