The Government has indicated that this allowance will increase each year in line with inflation (CPI) but only from 6 April 2018. It was reduced from \u00a31.25m down to \u00a31m from 6 April 2016. If you have more than \u00a31m in your pension pot or are likely to do so at retirement, you can\u00a0apply to protect it against reductions to the lifetime allowance.<\/p>\n
While some people may not be affected by the lifetime allowance, it\u2019s important to take action if the value of your pension benefits are approaching, or are above, the lifetime allowance. As pensions are a long-term commitment, what might\u00a0appear modest today could exceed the lifetime allowance by the time you want to take your benefits.<\/p>\n
Exceeding the lifetime allowance could have significant tax consequences, for example, any lump sum withdrawals you take from the excess amount within your pension are taxed at 55%, and if you retain the excess amount within your pension fund a 25% tax charge is made (and any income taken from the fund will be taxed at your marginal rate of Income Tax).<\/p>\n
If you could be affected by the reduction in the lifetime allowance, there are some actions you could take to help protect yourself from this potential tax charge. However, if you have accrued pension benefits since 6 April 2016, fixed protection will not be available, so you should obtain professional financial advice to look at the options available to you.<\/p>\n
If you are already taking benefits from a pension, this will also impact your lifetime allowance. It is important to note that the allowance applies to the value of your pension when you eventually come to draw money from it (and not the value on 6 April 2016). This means that even if your pensions are currently worth well short of the new \u00a31m limit, you could still be affected by the reduction and may need to take action now, even if you think the reduction does not currently really affect you.<\/p>\n
Another pension change which came into effect from 6 April 2016 is a reduction to the annual pension contribution allowance (the amount you can pay into your pension pot each year) for high earners. The allowance of \u00a340,000 will reduce by \u00a31 for every \u00a32 of income received above \u00a3150,000 (the threshold for the additional rate of Income Tax). The reduction is limited to \u00a330,000, meaning anyone with income of \u00a3210,000 or more will have a \u00a310,000 annual contribution allowance. Bear in mind that \u2018income\u2019 for this purpose includes employer pension contributions.<\/p>\n
A PENSION IS A LONG-TERM INVESTMENT. THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.<\/p>\n
YOUR PENSION INCOME COULD ALSO BE AFFECTED BY INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS. THE TAX IMPLICATIONS OF PENSION WITHDRAWALS WILL BE BASED ON YOUR INDIVIDUAL CIRCUMSTANCES, TAX LEGISLATION AND REGULATION, WHICH ARE SUBJECT TO CHANGE IN THE FUTURE.<\/p>\n","protected":false},"excerpt":{"rendered":"
How the lifetime allowance reduction could impact on your retirement savings The Government has introduced comprehensive reforms to the pension rules over the previous few years. One important change, which may have been overlooked by some savers, is the reduction of the lifetime allowance that applies to pension savings. The lifetime allowance is the total… Read more »<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[],"_links":{"self":[{"href":"https:\/\/www.vizionwealth.co.uk\/news\/wp-json\/wp\/v2\/posts\/1687"}],"collection":[{"href":"https:\/\/www.vizionwealth.co.uk\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vizionwealth.co.uk\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vizionwealth.co.uk\/news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vizionwealth.co.uk\/news\/wp-json\/wp\/v2\/comments?post=1687"}],"version-history":[{"count":0,"href":"https:\/\/www.vizionwealth.co.uk\/news\/wp-json\/wp\/v2\/posts\/1687\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.vizionwealth.co.uk\/news\/wp-json\/wp\/v2\/media?parent=1687"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vizionwealth.co.uk\/news\/wp-json\/wp\/v2\/categories?post=1687"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vizionwealth.co.uk\/news\/wp-json\/wp\/v2\/tags?post=1687"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}