If you earn more than £150,000 p.a., these pension changes will affect you!

This is what you need to know:-

  • The UK economy continues to be insolvent. So Cameron has told Osborne to fly another bombing mission on your pension fund
  • This time it’s not how big your fund can grow to; we’ve already seen that cut from £1.8m to £1m in recent years
  • From 6th April 2016 Mr Osborne is reducing what you can potentially pay into your pension each year from £40,000 to £10,000 p.a.. That might buy you the odd night out and a bottle of red when you hang your boots up, but the Sunseeker’s on hold.

We’ve got some ideas that deserve a cup of tea, a decent biscuit and a meaningful chat. We are going to call you to set that up. However, if preferable, please use the link below to book some time in your diary:

If you would like further detail, please read on:

The new pension freedom rules featured in our May 2015 blog entitled Pension Reforms – Challenges and Opportunities and these changes were welcomed due to their positive contribution to flexibility and fairness. However, the imminent changes scheduled for 6th April 2016 make for grave reading.

  • The rate of reduction in the annual allowance is by £1 for every £2 that the adjusted income exceeds £150,000
  • The maximum reduction will be £30,000, thus reducing the annual allowance to £10,000 for anyone with adjusted income of £210,000 or above

Please note that adjusted income is all income plus any pension contributions paid in the relevant period. This means that a person would not be able to reduce their adjusted income simply by sacrificing salary or bonus payments in exchange for employer contributions.

Fortunately the tapering of the annual allowance does not prevent an individual from using carry allowances. Please see below example:

If an individual has adjusted income in excess of £210,000 in the 2016/17 tax year, they would have a tapered annual allowance of £10,000 for 2016/17. However, if they were a member of a pension scheme and had not made any contributions in the previous three tax years the maximum contribution they could make without incurring the annual allowance charge would be £140,000. This would use up annual allowance as follows:

  • 2016/17 £10,000 (current year’s annual allowance must be used before carry forward)
  • 2013/14 £50,000 (oldest carry forward is always used first)
  • 2014/15 £40,000
  • 2015/16 £40,000

If you have any available cash to consider making a lump sum contribution to your SIPP you should call or email us immediately to discuss if this is suitable for you.

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