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.