Posts Tagged ‘Pensions’

GP Pensions: Lifetime Allowance

Posted on: July 10th, 2013 by Sarah Curzon No Comments
Sarah Curzon, Tax Director, MHA Broomfield Alexander

Sarah Curzon, Tax Director, MHA Broomfield Alexander

As many readers will be aware the lifetime allowance for pension savings was reduced from 6th April 2012 from £1.8m to £1.5m.  The Government announced in December 2012 further changes to the lifetime allowance being reduced on 6th April 2014 from £1.5m to £1.25m.

The lifetime allowance is a limit on the amount of value a person can have saved in a pension without incurring any additional tax charges.  If the pension savings limit is exceeded then tax is charged on the excess amount over the limit when the pension is drawn.

Any excess amount over the lifetime allowance taken as a lump sum in retirement is taxed at 55% and any excess amount drawn as a regular pension is taxable at 25%.

With reduction of the lifetime allowance to £1.25m many more GP’s could be affected.  If you have an NHS pension in excess of £54,000 you are likely to exceed the lifetime allowance.  If you have other pension provision over and above your NHS pension you should review the position to ensure that you have not exceeded the lifetime allowance.

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State pensions subject to PAYE?

Posted on: May 10th, 2012 by Leighton Reed No Comments
Leighton Reed, Director, MHA Broomfield Alexander

Leighton Reed, Director, MHA Broomfield Alexander

Apparently, 60% of pensioners are unaware that their State Pension is taxable income. Historically this assumption is probably based on the way in which their pension is paid without deduction of tax.

This may be about to change!

The Office of Tax Simplification has come up with an idea to streamline the taxation of pensioners. They are seriously considering bringing the State Pension into the pay-as-you-earn system.

If this happened HMRC would issue a code number to the Department of Works and Pensions who would calculate any tax due and deduct it before making the net of tax payment to a pensioner’s bank account.

If you have no other income apart from your State Pension you are unlikely to be affected. However, if your personal allowances are already used against other income (including other pensions) you would likely suffer a tax deduction. No change is proposed before April 2013.

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Retirement incomes tumble

Posted on: January 18th, 2012 by Leighton Reed No Comments
Leighton Reed, Director, MHA Broomfield Alexander

Leighton Reed, Director, MHA Broomfield Alexander

Expected retirement incomes have tumbled to a five year low with almost £3,000 wiped from their value, according to research from Prudential Insurance.

The survey shows that people retiring this year expect to live on an average income of £15,500, more than £1,000 less than those who retired last year and £3,100 less than those who retired in 2008.

Due to inadequate retirement savings, one in five of those due to retire this year will be forced to survive on an annual income of less than £10,000 .

Experts have attributed the fall to the recent chaos on the stock market, shrinking annuity rates, which dropped by 8% in 2011, the impact of the credit crunch, banking crisis, recession, and concerns over the Eurozone, has been reflected in the fact that expected retirement income levels have hit a five-year-low.

There are some practical steps that workers and imminent retirees can take to ensure a more comfortable retirement. For those who are still working, it has never been a more important time to save into a pension. The longer that savings are invested in a retirement pot, the greater the opportunity they will have to grow.

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Tax relief on pensions – new reduced cap

Posted on: October 22nd, 2010 by LeightonReed
Leighton Reed, Director, MHA Broomfield Alexander

Leighton Reed, Director, MHA Broomfield Alexander

The amount that people can add to their pension funds and on which they can receive tax relief is to be reduced to less than a fifth of its current level.

The Treasury has confirmed plans to reduce the annual limit from £255,000 to £50,000 as part of changes which it hopes will save the government more than £4bn a year. The initial consultation earlier this year had suggested a reduction to between £30,000 and £45,000.

Also to be reduced is the lifetime allowance on money that can be saved in a pension fund for which tax relief is allowed. This will come down from £1.8 million to £1.5 million.

The government has estimated that the change to the annual allowance will affect some 100,000 savers of whom 80 per cent will be earning over £100,000.

However, it is expected that the move will allow high earners to continue to benefit from tax relief on pension savings at the highest rate at which they pay income tax. The previous government had proposed tapering pensions tax relief down to 20% for those earning between £150,000 to £180,000, plans which have now been dropped.

The new annual allowance comes into effect as from April 2011; the new lifetime allowance from April 2012.

To protect individuals who exceed the annual allowance due to a one-off ‘spike’ payment, the government is to allow them to offset this against unused annual allowances from previous years.

The move may frustrate savers planning to make large pension contributions in the years leading up to retirement – an approach sometimes favoured by small business owners.