Latest news with #SteveWebb
Daily Mail
6 days ago
- Business
- Daily Mail
I'm 55 and want to take £15,000 from my pension pot - can I do it tax free? STEVE WEBB replies
I'm 55, and turn 56 this year. I want to take £15,000 out of my pension pot as we'd like to buy a camper van and do some travelling. We did look at loans but they are so expensive. I have no plans to retire and am not thinking about it for the time being. Would I be able to take that amount out and not pay tax on it? Does it effect the rest of my money, and can I carrying on paying into my pension/ I don't plan to take anymore out after this. My mortgage finishes in five years I will be looking forward to that. Steve Webb replies: One of the big advantages of having a 'pot of money' type pension is that you now have a lot of flexibility about how and when you take it. The potential to use your pension to enjoy this phase of your life is a positive thing and is a reward for the sacrifices you have made to build up the pot. But there are various traps to be careful about which I will run through here. It's probably obvious, but you always need to bear in mind that money you spend in your fifties is not going to be available to you in later retirement. At that stage you will no longer have a wage coming in and may be heavily dependent on your state pension and remaining private pension pot. Given that most of will have a longer retirement than we expect, it's important to be cautious in taking money out early. One extra point to note is that the minimum access age for pensions (the so-called 'Normal Minimum Pension Age') is set to rise overnight on 6 April 2028 from 55 to 57. This won't affect you, but it's something that other readers who are slightly younger than you may wish to consider. There's more information about this change in one of my earlier columns. In terms of tax, there are several ways in which you can access your pension, and the tax treatment is different in each case. One option is to move your pension pot into what is called 'flexi-access' drawdown. With this route, you take a quarter of your current pot tax-free and then put the rest into a drawdown account where it goes on being invested. You can then take further amounts out of that drawdown pot, though these are subject to tax when you take them. To give an example, if you have £60,000 in your pension pot you could get £15,000 out tax free to spend on your camper van and travel, and leave the rest to be invested. A second option is to move your pension pot into a different form of drawdown. This is sometimes called drawdown in 'chunks' (or more formally 'uncrystallised funds pension lump sum' or UFPLS). In the case every chunk that you take out is 25 per cent tax free and 75 per cent taxed. For example, if we assume you are a basic rate taxpayer, if you took out (say) £18,000 from such an arrangement, then you would get a quarter (£4,500) tax free and would pay 20 per cent tax on the remaining £13,500. This gives you a tax bill of £2,700 and leaves you with just over £15,000 after tax. A third option is to cash out a pot in full. In this case you can take 25 per cent tax free but the rest is added to your taxable income for this year. The problem with this is that if you also have a wage you could easily find that adding your 75 per cent of your pension on top takes you into a higher tax band and you will pay a lot of tax. In terms of paying into your pension in future, there's no reason in principle why you cannot go on building up pension savings even if you have accessed some money for a particular reason. However, the key issue you may face is something called the Money Purchase Annual Allowance (MPAA). If you take money out of your 'pot of money' pension in a way that involves taking taxable income (e.g. if you go for flexi access drawdown and take more than your tax-free 25 per cent) then you trigger a much lower annual limit on the amount you can pay in whilst getting tax relief. To be more precise, the normal Annual Allowance for tax-privileged saving is currently £60,00 per year, but the reduced allowance (the MPAA) is just £10,000. This means that if you thought that you were likely to want to put more than £10,000 per year (including your employer contribution) into your pension – perhaps in a few years' time when you have cleared your mortgage - then you would need to make sure you avoid accessing your pension now in a way that triggers the lower limit. You can read more about what does and does not trigger the MPAA here. Finally, as you are aged 55 or over you can also contact the free 'Pension Wise' service to talk through your options before you make a decision and this would probably be a sensible thing to do first. Ask Steve Webb a pension question Former pensions minister Steve Webb is This Is Money's agony uncle. He is ready to answer your questions, whether you are still saving, in the process of stopping work, or juggling your finances in retirement. Steve left the Department for Work and Pensions after the May 2015 election. He is now a partner at actuary and consulting firm Lane Clark & Peacock. If you would like to ask Steve a question about pensions, please email him at pensionquestions@ Steve will do his best to reply to your message in a forthcoming column, but he won't be able to answer everyone or correspond privately with readers. Nothing in his replies constitutes regulated financial advice. Published questions are sometimes edited for brevity or other reasons. Please include a daytime contact number with your message - this will be kept confidential and not used for marketing purposes. If Steve is unable to answer your question, you can also contact MoneyHelper, a Government-backed organisation which gives free assistance on pensions to the public. It can be found here and its number is 0800 011 3797.
Daily Mail
07-07-2025
- Business
- Daily Mail
How do personal pension contributions affect what Universal Credit I receive? STEVE WEBB replies
I'm on Universal Credit and make contributions into a personal pension in addition to my workplace pension. Unfortunately, I've had trouble persuading Universal Credit to deduct my personal pension contributions from my income. Could you confirm that my pension contributions are deductible? And do you know if they deduct just the amount I pay in, or do they deduct the full amount that goes into my pension which includes the tax relief from HMRC? Steve Webb replies: The good news is that for people on Universal Credit, the money that you pay into any pension is deductible from your income before your UC is calculated. By paying into a pension, your disposable income is lowered and this means you get extra UC compared with someone who isn't contributing to a pension. This makes saving into a pension even more attractive for people on benefit than it is for many other groups. As you have found, whilst the Department for Work and Pensions handles all of this automatically when it comes to contributions made through your pay packet, many people have reported problems getting them to accept that personal pension contributions which you make directly are also deductible. We have covered examples of this problem previously on This is Money: Pension blunder at DWP discovered by Steve Webb means thousands could be underpaid Universal Credit The rules are however quite clear. According to the Universal Credit Regulations 2013, the DWP should deduct any pension contribution you make and not just those made through a workplace pension. The exact wording (from Section 55 of the regulations) is: '(5) In calculating the amount of a person's employed earnings in respect of an assessment period, there are to be deducted from the amount of general earnings or benefits specified in paragraphs (2) to (4)— (a) any relievable pension contributions made by the person in that period' You will see that it says *any* pension contributions and not just those made through a workplace pension. For people who are self-employed, and who declare their income to DWP through the standard UC forms for the self-employed, they should be prompted to provide information about their pension contributions alongside information about their profits from self-employment. These contributions should automatically be deducted from their profits before UC is calculated. But in your case, DWP will not know about the personal contributions that you have made and so you have to notify them each time you make a contribution so that this can be taken into account when your UC is worked out. One other question which arises is exactly what figure they should use. As you probably know, when you pay directly into a personal pension this is topped up by HMRC. For example, if you pay in £80, HMRC will add £20 giving a 'gross' contribution of £100. The £20 is pension tax relief awarded at the basic rate. Those who are higher rate taxpayers can fill in a tax return and claim back additional tax relief. In the old system of working tax credits, which was based around people's gross income, it would have been the full £100 'gross' pension contribution which was deducted. However, under Universal Credit a recent benefit tribunal case in which I was involved has confirmed that for UC purposes it is the 'net' figure which should be deducted. In the example where you pay £80 which is topped up to £100 by HMRC, it is the actual amount that you paid in – the £80 – which is the correct figure to be used in the calculation. Ask Steve Webb a pension question Former pensions minister Steve Webb is This Is Money's agony uncle. He is ready to answer your questions, whether you are still saving, in the process of stopping work, or juggling your finances in retirement. Steve left the Department for Work and Pensions after the May 2015 election. He is now a partner at actuary and consulting firm Lane Clark & Peacock. If you would like to ask Steve a question about pensions, please email him at pensionquestions@ Steve will do his best to reply to your message in a forthcoming column, but he won't be able to answer everyone or correspond privately with readers. Nothing in his replies constitutes regulated financial advice. Published questions are sometimes edited for brevity or other reasons. Please include a daytime contact number with your message - this will be kept confidential and not used for marketing purposes. If Steve is unable to answer your question, you can also contact MoneyHelper, a Government-backed organisation which gives free assistance on pensions to the public. It can be found here and its number is 0800 011 3797.
Metro
03-07-2025
- Business
- Metro
State pensioners being short-changed £210,000 depending on where they live
Where someone lives could mean a difference of hundreds of thousands of pounds in state pension payouts, a new analysis has revealed. Pensioners in well-off areas receive around £210,000 more in state pension payments in comparison to those in the most deprived areas. The divide is driven by differences in life expectancy between the poorest and richest parts of the country, the analysis by The Telegraph found. Rich people live longer and therefore receive more pension payments over their lifetime. Hart in Hampshire has the highest life expectancy at 85, with the average retiree drawing a state pension at the age of 66 and receiving total payments of £375,610. Other areas with high life expectancy include Kensington and Chelsea, Horsham, South Cambridgeshire, Uttlesford and South Oxfordshire. These residents live long enough to accumulate £347,978 in state pension payments over their lifetimes. Those in well-off areas benefit from the triple lock system, which means annual payment increases by the highest of inflation, wage growth or 2.5%. To view this video please enable JavaScript, and consider upgrading to a web browser that supports HTML5 video On the other end of the spectrum, Blackpool has the lowest life expectancy at 76. Pensioners here are short-changed with a state pension at the age of 66 for 10 years, totalling £165,720 over their lifetime. Other areas with low life expectancy at the age of 77 include Middlesbrough, Hull, Manchester, Liverpool and Blaenau Gwent in South Wales, resulting in life payments of £185,151. This means between Hart and Blackpool, there is a £209,890 gap between the two areas. Steve Webb, former pensions minister and now partner at consultancy LCP, suggested the problem is not to do with the pension system. He told Metro: 'The pension system is a mirror to the inequality we face in the country. 'This inequality has got worse because of long-term issues that can't be fixed by one specific policy. 'On one level, this is what you would expect: the longer you live, the greater the pension is. 'The problem we face is why those who are less well-off have shorter lives. 'The way to try and prevent this is better public health campaigns around leading a healthier lifestyle.' Director of Age UK Caroline Abrahams warned: 'It's clear from these statistics that raising the state pension age will particularly penalise those on lower incomes, who are more likely to live in deprived areas.' Pensioners can withdraw their state pension at the age of 66, but this will rise to 67 by 2028 and 68 between 2044 and 2046. There is debate about whether people who are likely to die earlier should retire earlier. For example, in France, someone who started work rather than going into higher education can access the state pension sooner, as can those including miners, soldiers and police officers. More Trending Steve added that this would be 'fraught with challenges' if done in this country. He said: 'For example, there would be 'boundary issues' where people living on two sides of the same street could have different state pension ages. 'There would also be issues about people whose life was spent in a prosperous area, but claiming state pension from an address in a deprived area in order to access an earlier pension. View More » 'Similarly, any attempt to have lower state pension ages for those who had more physically demanding jobs are undermined by the lack of data on the jobs people have done over their lifetime.' Get in touch with our news team by emailing us at webnews@ For more stories like this, check our news page. MORE: Exact amount you'll need in savings at age 30 to be able to retire revealed MORE: Millions could be paying off debt well into retirement amid 'pension postcode lottery' Your free newsletter guide to the best London has on offer, from drinks deals to restaurant reviews.
Daily Mail
16-06-2025
- Business
- Daily Mail
How do I stop my pension being used to promote economic growth - I think Rachel Reeves is ignoring the risks: STEVE WEBB replies
I would appreciate you doing a piece on the recent Mansion House accord. It worries me for my default pension fund investments with my own pension firm (I see they are signing up). I note Rachel Reeves says it will 'boost pension pots', which ignores the downside risk. And I do not want to take part. Are there pension suitable funds out there that I could select that will not take part in this? To be clear I want to stay with my current provider as my pension is still receiving employer contributions. Steve Webb replies: The Mansion House Accord is a voluntary agreement entered into by 17 large pension schemes and pension providers last month. These schemes have signed up to a target that 10 per cent of the money in what are called their 'main default arrangement' (of which more later) will be invested in 'private markets', with at least half of this being in the UK. You can see which schemes have signed up and read the full text of the Mansion House Accord here. There are a few technical terms used in that description which it is worth explaining, as they are relevant to your question. The first is the idea of a 'default arrangement'. This is simply the place where your money is invested unless you make an active choice to do something different. In most schemes, the vast majority of member savings are held in these 'default' arrangements, but there will generally be other options in which you can invest which are not covered by this agreement. The second is the idea of 'private markets'. Historically, a lot of pension money has been invested in things like the major stock markets in the US, the UK and around the world. Large amounts have also been invested in things like government debt (like UK government bonds, called gilts). These types of investment are in 'public markets'. But governments (and pension schemes) are increasingly interested in other ways of investing which they believe have the potential to generate more economic growth (for society as a whole) and potentially better returns to members. This could include investing in start-up or 'early-stage' businesses which are not (yet) listed on stock markets. It could also include investing directly in things like big infrastructure projects such as the upgrade to the national grid needed in the coming decades as the way we power our economy changes. In principle, there is no reason why an allocation to these 'private markets' should be damaging to your pension. Although the costs tend to be higher, the expected return over the long-term is typically also higher. But it is true to say that there is greater uncertainty about those returns, which is why private markets will typically be only a relatively small part of the overall investment mix – 10 per cent in this case. If you read the text of the Accord, you will see that there are several safeguards built in to protect members. Fiduciary duty: The trustees (and others) who oversee your pension have an over-riding duty to put your interests first. The goal of 10 per cent investment in private markets by 2030 is subject to the trustees being confident that in doing this they are still acting in your best interests. Consumer Duty: In July 2023, the Financial Conduct Authority introduced the powerful concept of 'Consumer Duty' which applies to the insurance companies who provide pensions. In simple terms, they now have an over-riding duty to do right by their customers. Although it is pretty shocking that such a rule was needed, it has already had a powerful impact in the financial services sector. Signatories to the Mansion House Accord have said that they will only pursue the 10 per cent target if it is consistent with their responsibilities under 'Consumer Duty'. You can read more about Consumer Duty here. If the Mansion House Accord was simply a voluntary agreement, with schemes only heading for 10 per cent if they were confident it was in the member's interest and consistent with the duty to do right by their consumers, then you could probably be fairly relaxed about all of this. But there is a sting in the tail. The Government is not convinced that the industry will deliver on this goal (partly based on the slow progress on previous similar initiatives) and so are planning to give themselves a power via the recently-published Pension Schemes Bill to force pension schemes to invest a particular proportion of their default funds in private markets. Although the Bill contains a safeguard where schemes can argue that they should be exempt from this if they are convinced it would not be in the members' interests, this is still a pretty big stick, and will put pressure on schemes to hit the target. My personal view is that the Government simply should not be doing this. If the Mansion House Accord is clear that trustees' first duty is to their members, and that schemes should do right by consumers, then I cannot see how the Government can justify a threat to over-ride all of this. In practice however, a 10 per cent allocation to private markets is probably a reasonable enough thing for large schemes to do, and I suspect that most of the signatories were happy to sign up on the basis that they were planning to go down this route in any case. If you remain unhappy, you have the option of simply moving your workplace pension money into one (or more) of the alternative investment choices available. You should be aware that these funds may have higher charges (as they are not covered by the 0.75 per cent charge cap on workplace pensions) and you will need to understand what level of investment risk you are taking on. But you may be reassured to know that you can stay with your current provider but without being bound to remain in the arrangement covered by the Mansion House Accord. Ask Steve Webb a pension question Former pensions minister Steve Webb is This Is Money's agony uncle. He is ready to answer your questions, whether you are still saving, in the process of stopping work, or juggling your finances in retirement. Steve left the Department for Work and Pensions after the May 2015 election. He is now a partner at actuary and consulting firm Lane Clark & Peacock. If you would like to ask Steve a question about pensions, please email him at pensionquestions@ Steve will do his best to reply to your message in a forthcoming column, but he won't be able to answer everyone or correspond privately with readers. Nothing in his replies constitutes regulated financial advice. Published questions are sometimes edited for brevity or other reasons. Please include a daytime contact number with your message - this will be kept confidential and not used for marketing purposes. If Steve is unable to answer your question, you can also contact MoneyHelper, a Government-backed organisation which gives free assistance on pensions to the public. It can be found here and its number is 0800 011 3797.
Yahoo
10-06-2025
- Business
- Yahoo
500,000 more pensioners at risk of losing winter fuel payments under Labour
An extra half a million pensioners could lose their winter fuel payments by the end of the decade, new analysis suggests. Rachel Reeves was forced into a humiliating about-turn on Monday after announcing pensioners with incomes of less than £35,000 a year would be eligible for the benefit. It means an extra 7.5 million pensioners will receive the payment, worth up to £300, this year. But experts point out 500,000 of these will lose the payment by 2030, as rising incomes collide with the payment. Officials at the Department of Work and Pensions (DWP) refused to comment on Monday on whether the threshold would be increased in line with inflation or the so-called 'triple lock' each year. Government sources told The Telegraph that no more detail would be provided until the next Budget, when the measure will be evaluated by the Office for Budget Responsibility (OBR). If the threshold remained the same, more pensioners would become ineligible each year as their annual incomes increased. Sir Steve Webb, former pensions minister and partner at pension consultants LCP, said: 'The Government's own figures clearly suggest that they expect the number of losers from the new policy to rise each year. 'With around two million pensioners currently over the £35,000 threshold, this number could easily rise by another half a million by 2030. 'This could end up being another way in which governments use inflation to quietly raise additional revenue year-by-year.' This is not the only form of fiscal drag faced by taxpayers. The income tax thresholds have been frozen until 2027-2028, which will drag more than one million taxpayers into paying additional rate tax. This phenomenon, known as 'fiscal drag', represents a huge stealth tax raid. Income tax thresholds have been frozen since 2021-22, dragging millions of taxpayers into the income tax net for the first time, or into higher brackets. The additional rate threshold was initially frozen at £150,000 before being reduced to £125,140 in 2023. HM Revenue & Customs (HMRC) data via a Freedom of Information request showed that the number of people aged 65 and over paying the top rate of tax more than tripled from 44,000 in 2021-22 to an estimated 137,000 in 2025-26. Sir Steve also questioned the Government's numbers on how much the changed policy would save the Exchequer. He said: 'Our analysis also suggests that the new policy will raise less money next year than the headline figure quoted of £450m. 'Assuming an initial yield of around £350m, roughly two thirds of this will be wiped out by higher pension credit costs. The net revenue from the policy is likely to end up barely a tenth of the amount banked by the Chancellor when she presented her last Budget.' While the Government said that the policy measure would save £450m, it also said that it expected to spend £1.25bn on the payments. Adding the figures together, this would have meant a total saving of £1.7bn if the Chancellor had not reversed the policy. But figures published in last year's Budget suggest that the first time the policy came close to raising £1.7bn was in 2029-2030. In the House of Commons on Monday, shadow secretary for work and pensions, Helen Whatley, said that the policy would save as little as £50m. She added: 'After all this, the savings for the Treasury this coming year may be as little as £50m.' Ms Whatley described the about-turn as 'the most humiliating climbdown a Government has ever faced in its first year in office'. The Treasury was contacted for comment. Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.
