Urgent Action Needed by the Deadline – 5th April 2012
Who does this concern?
Anyone who expects their overall pension value to be above £1.5m by the time it is crystallised.
Individuals in final salary pensions schemes who are expecting pensions of £65,000-£75,000p.a.
What is happening?
From April 6 2012, the Lifetime Allowance (LTA) – the overall maximum that can be drawn from a pension fund before tax penalties are imposed – will fall from £1.8m to £1.5m. Any pension benefits over and above the LTA will incur a tax charge of 55% for a lump sum and 25% plus income tax for regular payments.
However, the government has softened the blow for those currently expecting their benefits to be worth more than £1.5m by allowing individuals to lock into the current £1.8m limit.
How?
They must apply for fixed protection with HMRC.
Downside
- You cannot start a new arrangement other than to accept a transfer of existing pension rights
- You cannot have benefit accrual
- You will be subject to restrictions on where and how you can transfer benefits
What are the consequences of not having fixed protection?
If you take a lump sum having exceeded the LTA, the tax charge is 55%. If you take the benefits as income, the charge is 25% plus income tax at the member’s marginal rate.
For more details please contact us forthwith!