Pending Change in Pension Rules from January 2023

Woman reviewing pension plan

The latest Chancellor of the Exchequer, Jeremy Hunt, is looking at yet again changing the already hyper complex pension rules. Will this be another pointless exercise or is it something to be cheerful about?

So, what’s being considered? Too many Doctors and other senior, rather well paid, and fully pensioned people are retiring early because they are already maxed out on their pension allowance. This is causing significant problems, problems the government isn’t too keen to be fully truthful about, so we will be here instead.

We have, like most of the world, a lowering birth rate and increasing numbers of elderly. This isn’t sustainable and one of the reasons for unemployment not looking worse than it is, is the fact so many are taking early retirement, without a young person being born to replace them. This will be impossible to fund going forward as the number of taxpayers dwindles and the number of retired exceeds those who are being born. Germany, Japan, and China are in a far worse position than us, with a birth rate of 1.3 compared to our 1.8, but the replacement rate needed is 2.1 and this over time leads to a declining population. So, at some point in the near future, the world’s population will suddenly decline, so much for fears of over population, it was always more dangerous to be underpopulated.

So, it looks like the Chancellor is testing public opinion out on reducing or ridding the over 50’s from paying income tax. He’s also looking at either raising or getting rid of the annual allowance and life time allowances, which will enable greater contributions and flexibility in pension planning. This will also stop so many highly experienced Doctors from leaving early.

This might in part, have something to do with the proposed changes in the USA. The new Congress is looking to remove all Federal taxes, to be replaced with a sales tax instead. This will mean drastic cuts in government departments, and departments such as ATF will be defunded. What do you think will happen here if all Americans no longer have the pleasure of paying half their income in taxes?

For those who think this will never happen, just keep a close eye on the debate about the Fed debt ceiling, this will be used to twist arms and make this happen. It may make pension reforms much needed as new potential ‘brain drain’ happens again, where our best and brightest flee for the US, as they did in the 1970’s. We need more than pension reform to stop that happening.

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