Annual Allowance and Lifetime Allowance

09 June 2017

Tax on pensions is a complex subject.  The Government have made further changes to both the annual allowance and lifetime allowance.

Annual Allowance

In the 2015 summer budget, it was announced that all periods used for measuring a member's pension savings to test against the annual allowance must be aligned with the tax year.  During the transition, the period ending 5 April 2016 was split into two, with the maximum annual allowance for the whole period increased from £40,000 to £80,000.

We will write to all those who have exceeded the limit during the 2015/16 tax year by 6 October 2016.

From 6 April 2016 the normal annual allowance of £40,000 will be tapered down to £10,000 for higher paid individuals (although individuals are still able to carry forward any unused allowance from the previous 3 years).

Further information can be found in the Annual Allowance Factsheet.

Lifetime Allowance

From 6 April 2016 the lifetime allowance, which is the maximum amount of pension benefit that can be drawn from a pension (including lump sums) without triggering an additional tax charge, is reduced from £1.25 million to £1 million.

Subject to certain conditions being met, it is possible to apply for protection against additional tax charges.  You must successfully apply for the protection before you take any benefits after 6 April 2016.

Further information can be found in the Lifetime Allowance Factsheet.

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