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Does the Lifetime Allowance affect your pension?
The Lifetime Allowance is a maximum limit on the amount of pension benefits that can be drawn from an individual’s pension plans during their lifetime.
The Chancellor’s Budget, delivered on 16 March, quashed rumours about loss of tax relief on pensions.
The Chancellor introduced an ISA-style pension saving system, called the Lifetime ISA, available to the under-40s. However, changes to the Lifetime Allowance, set out in a previous budget, come into effect at the end of this tax year (5 April 2016). This may be something that requires action from you.
What changes are happening?
The current limit is £1,250,000, but from 6 April 2016 this will reduce to £1 million. The tax charge, if you take benefits in excess of this, is 55% of the amount.
If you are affected, what are your options?
There are two protections available for those who need it. Fixed Protection 2016 and Individual Protection 2016 (although the earlier Individual Protection 2014 can still be applied for in certain cases).
If you think you might need protection, think about the time between now and your retirement and, whilst it may be late in the day, take financial advice if you are unsure. None of us likes paying taxes, but even less so if the tax charge is an unnecessary one.
Read AFH’s Budget Summary 2016 report.
If you would like to discuss this or any other financial topic with an AFH Wealth Management adviser call them on: Tel: 0330 134 8821 or by email at: mail@afhgroup.com.
AFH Wealth Management is a trading style of AFH Independent Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority Financial Services Register no. 216704.
This article is for generic information only and should not be construed as advice. Please contact AFH Wealth Management before proceeding with any course of action.