Change to Pension Funding

From April 2016 we have 2 important funding rule changes for pensions:-

1. Lifetime Allowance reduces to £1m.
2. AA for high earners is being reduced on a tapered basis.

Those with income above £150,000 will see their annual allowance reduced by £1 for every £2 of excess income.  The maximum reduction will be by £30,000 which is reached by clients with income of at least £210,000.  There will clearly be tax implications for breaching these limits.  The question that has to be asked is will that be a bad thing in all cases?  We are thinking this will come down to individual circumstances:-

• What is value of individual’s estate?  i.e. do they have a potential inheritance tax liability?
• Who pays the pension contribution – employer or individual?
• Will the tax implication for IHT exceed the charge for the pension?

The conclusion can only be that the answers will be different depending on the individual’s own circumstances.

Please contact us so that we may assess the implications for your own situation if this is an area that may affect you.

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