Lifetime pension allowance
Lifetime pension allowance advice in Essex
Pensions can be confusing enough, and now with the introduction of the Lifetime Allowance this area of financial planning becomes even more confusing.
However, the expert financial planning team at French and Associates in Essex can talk you through the changes to the Lifetime Pension Allowances and how they may affect your retirement plans.
What is the Lifetime Allowance on Pension Schemes?
Whilst you can save as much as you like towards your pension there is a limit on the amount of tax relief you can receive. The lifetime allowance represents the maximum amount of pension saving you can build up over your life that benefits from tax relief i.e. where no tax is payable on your savings. However, If you build up pension savings worth more than the lifetime allowance you will be liable to pay a tax charge on the excess.
What changes are being introduced?
- From 6 April 2016 you will need to pay tax on any pension savings over £1m (reduced from £1.25m). unless you had some form of pension protection in place (i.e. Primary, Enhanced or FP2012)
Will these changes affect me?
- The changes will affect you if you have pension savings exceeding £1m in a registered pension scheme or an overseas pension scheme that qualifies for UK tax relief for either you or your employer on or after 5 April 2006.
- The lifetime allowance will apply to pension scheme that you don’t make payments into – for example if you’re in a workplace pension that only your employer makes payments into.
If I think I will be affected what should I do?
For those who have pension pots worth at least £1m (and without Primary protection) as at 5 April 2016, it is possible to arrange Individual Protection 2016 (IP2016). With IP2016, it is possible to have pension funds totalling up to £1.25m as at 5 April 2016, protected against the Lifetime Allowance (LTA) charge.
Application for 2016 can be made at any time. It is possible to continue accruing benefits but any amount above the IP2016 value will be subject to LTA charges.
The team at French and Associates will be happy to discuss your pension arrangements; contact us now for pension planning advice in Essex.