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Times
5 days ago
- Business
- Times
Stick or twist? Savers fear for the pension tax-free lump sum
Catherine Lay checks the value of her pension every day to work out how much she will get as her tax-free lump sum. Lay, a retired IT worker, is yet to tap into her pension pot. Since retiring in 2019, she has lived off her savings and the rental income from a two-bedroom flat that she bought with inheritance from her father. The 25 per cent tax-free lump sum from her pension pot, available to most savers when they turn 55 (rising to 57 from 2027), is a crucial part of the plan for the rest of her retirement. 'I'm hoping to take some of my tax-free cash and use the other part of my pension to buy an annuity that gives me £1,000 a month, so that my income stays under the personal allowance,' said Lay, 59, from Berkshire. 'The tax-free cash will then replace some of the savings I've spent. I look at the summary on my PensionBee app every day and work out what my 25 per cent tax-free part will be. Because I don't have a wage, my investments and savings are really important to me.' But like many others planning their retirement, she is worried that the days of the tax-free lump sum may be numbered. In the lead up to the budget in October last year and to the spring statement in March speculation was rife that pensions, and particularly the tax-free lump sum, which many see as the most important tool in retirement planning, were in the chancellor's crosshairs. With downgraded growth forecasts and a looming black hole in the nation's finances, most are expecting tax rises of some description at the next budget. Lay said: 'You can plan but then you hear that the tax-free lump sum might not be 25 per cent anymore or that it will go completely. And it's the timescale that is the biggest stress, that they could bring in a new rule tomorrow or the day after the budget.' • I raided my pension to beat the taxman but Fidelity's delays cost me £5,000 Tim Morris from the wealth manager Russell and Co said that clients in a rush to take their tax-free cash was the 'main trend' he was seeing among those approaching retirement. He said that it had started last year before the budget and continued to be a worry for clients today. 'The tax-free cash sum from pensions is a very popular option that the overwhelming majority of clients take up. At the moment, there is a general distrust about whether it is safe,' Alan Lakey from the advice firm Highclere Financial Services said. 'Clients do not trust the chancellor.' So far, there is little evidence to suggest that the tax-free lump sum is at risk. The lifetime allowance, the total you could build up in pension wealth before facing a hefty tax charge of up to 55 per cent, was effectively scrapped in April 2023 when the Conservative government removed the charge. When the allowance was fully abolished a year later the amount you could take as a tax-free lump sum was capped at 25 per cent of this limit — a catchy £268,275. The tax rules around pensions were also changed in the last budget, when Rachel Reeves announced that from April 2027 they would be subject to inheritance tax (IHT). 'Given the recent introduction of this limit on the amount you can take as tax-free cash, and the fact they are bringing pensions into the IHT net as well, I think scrapping the tax-free lump sum is unlikely to be high up on the government's agenda,' Scott Gallacher from the wealth manager Rowley Turton said. This doesn't stop savers worrying that a rule change will scupper their retirement plans, however, and there are concerns that there could be a repeat of last year, when there was a spike of savers taking their tax-free lump sum before the October budget. AJ Bell, an investment platform, said its customers took about £300 million extra from their pensions last year than expected amid concerns that the tax-free cash perk was set to be scrapped. Interactive Investor, another platform, said that the value of tax-free lump sum withdrawals were more than 500 per cent higher in July 2024, when Labour won the general election, than in July 2023. The advisers Money spoke to said that many of their clients then regretted their decision when the tax-free lump sum was left intact in the budget. Darren Cooke from Red Circle Financial Planning said: 'We saw some people trying to cancel tax-free cash withdrawals or claim a 'cooling off period' after the budget. All my clients got told to sit on their hands — and I was right.' As a general rule, it is best not to make big financial decisions based on speculation. Most advisers recommend that their clients stay put until any rules are confirmed, and do their best to talk people out of kneejerk reactions. A potential exception is if the tax-free lump sum is being lined up for a specific purpose, such as paying off the mortgage or giving to a child or grandchild for a house deposit. Lakey said: 'It is difficult for an adviser to make anything other than the general comment that if you are relying on it for some specific reason, then you might wish to take it while it's still there.' • The four (secret) pension tips that could cut your tax bill There is a wider financial planning question over the best way to take your tax-free cash, however. Withdrawing the whole sum at once might feel like a timely reward from the taxman for years of diligent saving, but it may not be the most tax-efficient way to use the perk. Your choices depend on the type of pension you have. If you have a defined benefit (DB) pension, which guarantees a set, often inflation-linked income for life, then you typically only have one decision to make: take your tax-free lump sum and get your set income, or leave your tax-free lump sum and get a higher income. Any pension income above the personal allowance of £12,570 is taxed, so the second option could mean that you pay more tax in the long-run. A defined contribution (DC) pension, a 'pot of money' pension where how much you get in retirement is based on how much you pay in and how your investments fare, comes with more choices. You could take your entire tax-free lump sum in one go. If you do this, you need to decide what you do with the remaining 75 per cent of your pension: buy an annuity (an insurance product that pays an income for life), move it into drawdown (where you leave it invested and take money as and when you need it), or take it all as cash. Or you could take your tax-free cash in stages as part of the regular income from your pension, which means that you pay less tax when you make withdrawals. To do this, you effectively access your pension pot in stages. Each time you take money from your pension pot, 25 per cent of it would be tax-free. For example, say you want to take £25,000 of pre-tax income from your pension pot each year. You would get 25 per cent tax-free (£6,250), alongside the next £12,570, which is tax-free thanks to the personal allowance. This means that only £6,180 of your income would be taxed. At the basic rate of 20 per cent, that gives you a tax bill of £1,236. If you had already taken your tax-free lump sum, then only the first £12,570 of your income would be tax-free. The rest, £12,430, would be taxed at 20 per cent and give you an annual tax bill of £2,486. • Why Gen Z is facing a pensions crisis The fact that pensions will soon be subject to IHT has changed the backdrop of financial planning for some savers. From April 2027 they will form part of your estate for inheritance tax purposes, meaning that the funds could be taxed up to 40 per cent. Pension left to a spouse or civil partner, including from 2027, is exempt from IHT. Before, it was common financial sense to keep as much money in your pension pot as possible because it could be passed on entirely IHT-free. However, it's now more complicated. Morris said the change meant that many were deciding to gift their tax-free lump sum now to avoid any future IHT bill. He said: 'I've had clients take the view that they may as well give away the money. Many baby boomers had the dual benefit of a DB pension and eye-watering house price increases. 'This has kept the Bank of Mum and Dad as one of the main lenders to the younger generation, and with pensions soon to be subject to IHT, I've seen the trend of giving away the tax-free cash accelerate this year.' For Lay, the raft of changes and possible changes to pension and tax rules have made it tricky to plan. She said: 'You just don't know what's going to happen do you? You have the cash Isa limit potentially being reduced, there's been discussion over the 25 per cent tax-free lump sum, and then pensions will be subject to IHT. 'I'm not saying things shouldn't change, but it makes things tricky. I've been really planning my pension for the last five to six years and making sure I've got my ducks in a row. For them to start shooting at those ducks is really annoying.'
Irish Times
02-08-2025
- Irish Times
India's embassy in Dublin warns citizens of increasing violent attacks in Ireland
Indian citizens have been warned they are at increasing risk of being attacked in Ireland. The alert follows a number of recent violent incidents. India's embassy in Dublin has issued an advisory to its citizens urging them to avoid isolated areas and to be generally more conscious of their security and surroundings. 'There has been an increase in the instances of physical attacks reported against Indian citizens in Ireland recently. The embassy is in touch with the authorities concerned of Ireland in this regard,' the note states. READ MORE It includes an emergency number for anyone in need of assistance. 'All Indian citizens in Ireland are advised to take reasonable precautions for their personal security and avoid deserted areas, especially in odd hours,' the embassy said. [ 'A lot of Indians are being targeted': Man suffers cheekbone fracture after attack by gang of teenagers in Dublin ] The warning comes two weeks after an Indian man was attacked in Tallaght by a group that stripped him of some of his clothing and subjected him to a beating. He suffered two large wounds to his forehead, a broken nose, black eyes and bruises to his legs and arms. The victim, an IT worker aged in his 40s, was left wandering bloodied in a residential area with no trousers after being targeted by a group of teenagers in Kilnamanagh. He was walking to the Vinayaka Hindu temple in Kingswood, following a Google Maps route, when the group surrounded him, taunting him and questioning why he had come to Ireland, before setting upon him. Local resident Jennifer Murray spotted the victim as she was driving in the area and stopped to go to his aid. She gave him a blanket and waited with him for an ambulance to arrive. After the attack, videos of the man were posted on social media, along with false claims he had exposed himself. The posts were amplified by far-right agitators and garnered hundreds of thousands of views within days. Later that day, also in Tallaght, a young man from India who is attending college in Dublin, was attacked by a group of teenagers in Seán Walsh Park at about 6pm. He suffered a broken nose. Indians in Ireland have said there have been other attacks, which have not been reported to gardaí, but details of which were shared on community WhatsApp groups. Both the attacks in Tallaght are being investigated by gardaí, who have appealed for witnesses to come forward. In reply to queries, An Garda Síochána said it 'takes hate crime very seriously' with each offence 'professionally investigated and victims supported during the criminal justice process'. The Garda has said hate-related crime was underreported. 'An Garda Síochána continues to encourage any victim of any crime to report this to An Garda Síochána including any indication that the crime may have a hate motivation,' it said. 'The increase in reporting of such incidents has been noted in each year of reporting, which is positive.' Garda data shows a 12 per cent increase in the number of hate-related incidents reported in the State between 2022 and 2023. Most of these were linked to the victims' ethnicity or nationality.
Daily Mail
25-07-2025
- Daily Mail
Unassuming Arizona woman, 50, imprisoned over secret scheme to help KIM JONG UN
A suburban Arizona woman has been sentenced to more than eight years in prison for helping North Koreans earn millions for the regime's nuclear weapons program by infiltrating US companies posing as American citizens, authorities said. Christina Marie Chapman, 50, has been ordered to serve eight-and-a-half years in prison plus three years of supervised release and pay hefty fines for her role in the international scheme, according to the Justice Department. Chapman ran a 'laptop farm' from her home in Litchfield Park outside Phoenix, where she helped North Korean workers with stolen identities work remotely at US-based companies. 'The case involved one of the largest North Korean IT worker fraud schemes charged by the Department of Justice, with 68 identities stolen from victims in the United States and 309 US businesses and two international businesses defrauded,' the Justice Department said. The companies included Fortune 500 companies, a top five television network, a Silicon Valley technology company, an aerospace manufacturer, a car maker, a luxury retail store, and a media and entertainment company. The Justice Department noted that the scheme attempted to infiltrate at least two government agencies, but was unsuccessful. It generated more than $17 million for Chapman and the Democratic People's Republic of Korea. Prosecutors said Chapman became involved around October 2020 and helped North Korean workers secure American jobs for about three years. She helped validate stolen identification information from US nationals so the North Korean workers could pose as Americans. Chapman turned her home into a 'laptop farm,' where she received computers issued by the companies so that they believed the workers were living in the US. She sent other laptops to foreign nationals overseas, including several shipments to a Chinese city on the border with North Korea. She would log on from her home while the overseas employees patched in remotely. Chapman listed her home address for the workers' paychecks, deposited them into her bank account and then transferred the funds to North Korea, keeping a cut of the pay for herself. She forged the signatures of the beneficiaries, sent false information to the Department of Homeland Security over 100 times, and created false tax liabilities for over 35 Americans. Chapman's involvement was part of a larger operation North Korean IT workers to infiltrate American companies. in May 2024, charges were brought against three unidentified foreign nationals and a Ukrainian man for creating fake accounts on US IT job search platforms. Oleksandr Didenko, 27, carried out the scheme from Kyiv for years. He sold the fake accounts to overseas IT workers, who then used the identities to apply for remote work based in the US. 'Several U.S. persons had their identities used by IT workers related to Didenko's cell, and evidence in the complaint showed that the overseas IT workers using Didenko's services were also working with Chapman,' the Justice Department announced at the time. Chapman's address came up multiple times after the Federal Bureau of Investigation launched an inquiry. Didenko was arrested by Polish authorities at the request of the Justice Department, seeking the fraudster's extradition. Chapman's residence was searched in October 2023, revealing the illegal 'laptop farm' she ran. She pleaded guilty in February to charges of conspiracy to commit wire fraud, aggravated identity theft, and conspiracy to launder monetary instruments. As part of her sentence, Chapman was ordered to forfeit $284,555.92 that was paid to the Korean workers and was fined $176,850. 'Chapman made the wrong calculation: short term personal gains that inflict harm on our citizens and support a foreign adversary will have severe long term consequences,' Acting Assistant Attorney General Matthew R. Galeotti said of her sentencing. 'North Korea is not just a threat to the homeland from afar. It is an enemy within,' U.S. Attorney Jeanine Ferris Pirro added. 'It is perpetrating fraud on American citizens, American companies, and American banks. 'The call is coming from inside the house. If this happened to these big banks, to these Fortune 500, brand name, quintessential American companies, it can or is happening at your company.' Chapman's case goes beyond her Arizona laptop farm, as the FBI has identified an ongoing threat of foreign nationals posing as Americans to secure remote work. The FBI issued an alert in January warning companies of a large-scale operation targeting the US. The alert noted that companies that outsource IT work to third-party vendors are particularly vulnerable targets. To prevent falling victim to the scheme, the FBI advised hiring managers to cross-reference photographs and contact information with social media to verify that the person applying for the position is really who they say they are. The bureau also noted that requiring in-person meetings and only sending tech material to the address listed on the employee's contact information helps prevent fraud.
