What will the Budget bring for Pensions?
It is expected that in the Budget on March 16th that there will be reforms to pensions.
It is expected that there will be a reduction in the Tax Relief available, if you are a higher or additional tax rate payer you receive tax relief at 40% or 45% currently. It is expected that the rate may become a flat rate for all, understood to be between 25% and 35%.
If you are a higher rate tax payer, you should look to contribute before the budget as to prevent a last minute surge (and use of tax relief) it is likely it will be with immediate effect.
Don’t forget Carry Forward is still available to use up unused allowances from previous allowances.
We already know that Pension Input Periods will be aligned on April 6th 2016.
If you contributed between 6th April and 8th July 2015, you were granted an extra PIP which allows you to contribute again prior to April 2016. The amount is dependent on your previous contribution.
Annual Allowance to be cut for high earners, the allowance is currently £40,000, this will be tapered down to £10,000
To avoid being caught out utilise your allowances prior to March 16th.
Lifetime Allowance to be reduced to £1M
Protect your current fund value by putting in place the appropriate protection, be it fixed or individual.
Other potential alterations may be the closure of Salary Exchange options for employers or a change to the limits that can be made by employers
If you make your pension contributions through your company, it may be the right time to make your contribution prior to any announcement. Whilst not expected ‘surprises’ have occurred in the past.
Employees and Sole traders, are the most likely to be affected and planning should be made immediately to avoid a potential loss in tax relief.
Don’t forget with the new pension freedoms and Death benefits a Pension is a highly effective tax planning vehicle and could be accessed in full or in part from age 55.
For further information please contact Steven Glicher and Co.