Lifetime allowance falls to £1.25m from 6 April 2014.
With rising stock markets and the introduction of 'individual protection', higher earners approaching retirement should check the value of their pension funds.
The lifetime allowance falls to £1.25m from the beginning of the next fiscal year and investors could find they are better off drawing their benefits now, or electing to adopt the current lifetime allowance of £1.5m. However, action needs to be taken before the end of the current tax year, to avoid a 55% tax charge on pension benefits exceeding £1.25m.
Individuals affected can elect for 'individual protection' and adopt their own lifetime allowance equivalent to the value of their pension funds as at 5 April 2013, provided this falls between £1.25m and £1.5m. This will have to be balanced against the alternative of fixed protection of £1.5m, no further pension contributions and a possible fall in income.
This reduction in the lifetime allowance will affect significantly more people than previous changes. Unwanted tax charges are a distinct possibility unless action is taken in good time. Forewarned is forearmed.
We have taken great care to ensure the accuracy of this newsletter. However, the newsletter is written in general terms and you are strongly recommended to seek specific advice before taking any action based on the information it contains. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. © Smith & Williamson Holdings Limited 2013. code 1485/2013/db 13/1127 expiry 31/05/2014