New year heralds ‘seismic changes’ to pension system, advisers warnJan 05, 2016
In his post-election Budget, George Osborne announced that from April 6, the amount higher earners are able to pay annually into their pension pot and still qualify for tax relief will be cut.
As a result, those earning over £150,000 will see their pension annual allowance steadily reduce from the current £40,000, while the allowance of individuals taking home more than £210,000 a year or more will automatically drop to £10,000.
From April, the lifetime allowance for pensions – the maximum amount a person can hold within their pension plans without incurring an additional tax charge – will also reduce for the third time since April 2012, falling from £1.25 million to £1 million.
This is likely to affect an estimated four million people. The lifetime allowance will then be frozen, only starting to increase annually in line with the Consumer Prices Index from April 6, 2018.
An announcement on further pension changes has now been delayed until the March 2016 Budget but it is likely the Chancellor will look to change the way pensions are taxed generally.
Matthew Beddall, of Grant Thornton’s Milton Keynes office, said: “2015 has seen seismic changes to UK pensions which will have repercussions for millions of people, and next year looks to be another one of upheaval.
“The government believes that for the majority of people, a £1 million pension pot is sufficient to see them through retirement. As a result, those with significant funds should review their position now and potentially look at alternative solutions for saving tax efficiently for retirement.”
Research suggests up to 250,000 earners may face unexpected tax charges due to confusion surrounding how and when these new pension changes take place.
- To help clarify the new legislation and provide expert advice, Grant Thornton is holding a series of breakfast briefings across the region. The Milton Keynes event will be held on January 20 at the DoubleTree by Hilton, stadiummk.
The Northampton event takes place the following day at Grant Thornton’s Northampton office.
Mr Beddall said: “The forthcoming pension changes could mean previous strategies will no longer be effective. When it comes to saving for pensions, nothing should be left to chance.
“It is now more important than ever for individuals to take professional advice to help protect their wealth and safeguard their future.”
- For further information on Grant Thornton’s pension breakfast briefings, contact the Grant Thornton Milton Keynes office on 01908 660666.