Compulsory pension contributions - NEST

From 2012, millions of workers will be auto-enrolled into pension schemes to which employers and employees will have to contribute.

Pension contribution tax relief and lifetime allowance

From tax year 2011/12 tax relief on pension contributions will be restricted to an annual allowance of £50k pa. The annual allowance will be "frozen" until at least 2016/ 17. Tax relief will be available at your highest marginal rate of tax. You will be able to "carry forward" unused annual allowance from the previous 3 tax years, including 2008/09, 2009/10, 2010/11 (£50k pa).



The new lifetime allowance (LTA) of £1.5 million will start from tax year 2012/13. Transitional provisions will be introduced for those individuals who:

• Have primary protection
• Have no transitional protection, but have pension benefits currently valued in excess of £1.5 million
• With pensions currently valued at less than £1.5 million, but who feel that the investment growth/benefit revaluation may take their pension value over £1.5 million
• Enhanced and primary protection will be retained, but enhanced protection will no longer be exempt from the AA test.

The rules relating to trivial pension commutation will be de-coupled from the LTA, therefore the existing limit of £18,000 will not be reduced.

Tax allowable pension contributions reduced from April 2011

From April 2011 the limits on tax allowable pension contributions will reduce from £255k to £50k. From 2013 the lifetime allowance will reduce from £1.8m to £1.5m. Hopefully, the Treasury will publish the details behind their proposals shortly.

2010 Budget Update

All the news from the budget.
Review of EFRBS & EBTs announced with potential changes from April 2011.
HMRC has said it is looking into proposals to extend trivial commutation rights to personal pensions funds worth up to £2,000 and allowing couples to pool small pension pots in order to achieve better value by buying a joint life annuity.

Pre Budget Report - Pension contributions for high earners

My understanding of the latest change is that if you earn/ have income of £150k + the tax relief on contributions will be restricted if contributions exceed £20k or in certain circumstances £30k per annum. Employer pension contribution were not included in the calculation of earnings/ income.

The amendment in the PBR states that for those earning £130k + employer pension contributions will be included in calculating the £150k level.

Simple.

Early retirement don't lose out.

The minimum age for drawing a pension will rise from 50 to 55 from 6th April 2010. If you are one of the 3 million people effected by the changes please feel free to call us and discuss your options - 020 8209 9247.

High earners - Pension amendments to the 2009 Finance Bill

If your income has been over £150k in the past two tax years or will be this year then your pension contributions may be restricted. More details can be found here or call us to discuss your particular case - 020 8209 9247

Effect of falling inflation on index-linked pension payments

Some personal pensions in payment will apparently be cut if the annual rate of inflation falls this year. The government is predicting RPI will show a year-on-year drop of more than 2% by the Autumn.
If that happens, some pension providers have said they will reduce payments on index-linked pension annuities. However, the government has promised that the basic state pension will rise by at least 2.5% even if prices fall year-on-year.

Some providers (including Axa, LV, Partnership, some Standard Life annuities, some Prudential annuities) have said that if RPI becomes negative payments will go down. Other providers have said they will not make cuts (Norwich Union, MGM, and Legal & General) but that payments will remain flat until RPI increases to a higher level than it was before.

Many company pensions may also be frozen if prices fall.