AUTUMN STATEMENT 2012: PENSION FUNDING REVIEW
05 Dec, 2012
Today’s Autumn Statement has confirmed that the maximum amount of tax efficient pension saving an individual can make in one year, known as the annual allowance, will be reduced from £50,000 to £40,000 in the 2014/15 tax year. The lifetime allowance will also be reduced from £1.5m to £1.25m.
Robin Hames, head of marketing at Capita Employee Benefits, commented: “These reductions further complicate retirement planning for high savers. This is bound to catch out high earners with career breaks and entrepreneurs who may try to fund their retirement after establishing their business.
“Another key consequence is that this brings more complexity around fixed, primary and enhanced protection and could signal another round of complicated protection legislation.
“Savers affected by this change who have not used all their annual allowance in the previous three tax years may want to consider using this unused relief in that year, a process called carry forward. Savers must have sufficient earnings to obtain tax relief on this amount and must be aware of the effect of the lifetime allowance.”
The annual allowance was reduced to £50,000 from £255,000 from 6 April 2011.