Pension values are now tested against the Lifetime Allowance
every time additional benefits are taken, or at age 75 if you have yet to take benefits.
Sir Steve Webb, a former pensions minister who is now director of policy at Royal London, said: "This research shows, for the first time, how the drastic cuts in the Lifetime Allowance
mean that large numbers of workers will now be caught by a limit that was originally only designed for the super-rich.
Those tax advantages benefit the individual at the cost of the tax man and this is worth bearing in mind even if you don't think you will ever reach the Lifetime Allowance
This month another PS250,000 was lopped off the lifetime allowance
, the amount you can taxefficiently save into a pension.
CHANGES brought in by the Finance Act 2011 mean that from April, 2012, the maximum amount of pension savings that can be accumulated without liability to the Lifetime Allowance
charge redus ces from pounds 1.8m to pounds 1.5m.
The Chancellor surprised us all by announcing that the Entrepreneurs Relief Lifetime Allowance
(which converts some capital gains from 18% to 10%) would be doubled to pounds 2m.
From A-Day the amount of the pension share will count against the recipient's lifetime allowance
, rather than the donor's.
That review, which had a panel including renowned fund manager Neil Woodford, reported back at the end of last year and called for the lifetime allowance
to be increased to allow for patient capital investment.
Unless you are likely to be subject to both Lifetime Allowance
(Total benefits over PS1m) and Annual Allowance (based on USS, this will only affect those with salary over PS125,000 or so) it is likely to be worth making the extra contribution if you can afford to lock the money up until retirement age.
A There is a "lifetime allowance
", which puts a cap on the amount you're allowed to save into a pension before it is subject to 55% tax.
The lifetime allowance
is also reducing and the 2013/2014 tax year will be the last year that this will be PS1.5 million.