Change is afoot when it comes to pension planning. So if you are happily saving for your pension assuming that you know what your contributions are allowed to be, then be aware of the Chancellor’s latest involvement.
From April 2016, if you are earning more than £110,000 you will need to consider not just your basic salary but your total ‘adjusted income’ when making pension contributions, not forgetting the lifetime allowance – which is decreasing again. More important is the fact that it is easy to forget that the membership of a final salary or defined benefit pension scheme is classed as a contribution. So not only can you break the annual allowance and end up with a tax charge, you may also be making the lifetime allowance problem worse.
What is even more surprising is that over the last few months we have seen numerous examples of clients who were not told of this problem by their pension trustees. Many could have easily made incorrect Tax Returns, leaving themselves open to interest and penalties. Moreover, we have even seen a pension trustee recently express surprise at the rules, realising they had not made a rather large UK workforce aware of the implications.
If you have not already done so we would encourage you to review your pensions. If you require assistance with your overall pension planning or need help to ensure that you are reporting everything correctly please get in touch. We are here to help.