Pensions

Pensions

To pay for the reforms to inheritance tax and to control the cost of pensions tax relief, significant changes to the reliefs available via pension planning have been announced, with further amendments also being likely in the near future.

Reduced Pension Annual Allowance for Additional Rate Taxpayers

From April 2016 the government will introduce a taper to the Annual Allowance for those with adjusted annual incomes, including their own and employer’s pension contributions, over £150,000. For every £2 of adjusted income over £150,000, an individual’s Annual Allowance (the limit on the amount of tax relieved pension saving that can be made by an individual or their employer each year) will be reduced by £1, down to a minimum of £10,000.

To ensure this measure is focussed on the higher and additional rate tax payers who currently gain the most benefit from pension tax relief, those with income, excluding pension contributions, below a £110,000 threshold will not be subject to a Tapered Annual Allowance.

This is a call to action for high earners to seek Independent Financial Advice now, in order to maximise the reliefs currently available.

Further Consultation on Pensions Tax Relief

The government is now consulting on whether there is a case for reforming pensions tax relief even further. In his budget speech the Chancellor even suggested that the Government may be open to considering ‘radical’ changes, such as beginning to tax Pensions in a similar way to ISA’s.

Secondary Market for Annuities

Following consultation, the government has decided to delay implementation of this measure, originally announced in the last budget, until 2017, in order to ensure there is a robust package to support consumers in making their decision. It will set out further plans for introducing this measure in the autumn of 2015.

Lifetime Allowance for Pensions

The government will stick with their previously announced plan to reduce the Lifetime Allowance for pension contributions from £1.25 million to £1 million from 6 April 2016. Transitional protection for pension rights already over £1 million will be introduced alongside this reduction to ensure the change is not retrospective. This is another area where Independent Financial Advice should be sought. The Lifetime Allowance will be indexed annually in line with CPI from 6 April 2018.

If you have any queries on any of the above changes or how they may affect you please contact Nathan Glaister from the Dodd Wealthcare team on 01228 530913.

Dodd Wealthcare Limited is an appointed representative of InvestAcc Limited which is authorised and Regulated by the Financial Conduct Authority.
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Nov 19

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