The Government has made fundamental changes to pensions that affect all of us.
Clients have concerns that having increased flexibility to draw more or all of their income may cause them to run out of money in their lifetime. Other clients want to understand how the Lifetime Allowance (or cap on the accumulation of pensions) which is reducing from £1.25 million to £1 million in the 2015/16 tax year impacts on their accumulated benefits. In our experience, some clients think that the pension cap only applies to invested schemes, not final salary schemes. Others do not realise that they are unable to protect schemes at the current LTA, £1.25m in the current tax year.
The reality is that you can protect your pensions and all schemes are tested against the LTA at the point benefits are taken and when clients reach age 75 – two stages at which a potential 55% tax charge on benefits above the cap may apply. Finally, there are major changes afoot for high earners regarding the total contributions that can be paid for clients in the 2016/17 tax year. Many employers also have to set-up their own pension to meet the new Auto-Enrolment provisions. Our message; these changes require careful consideration and planning now.
If you don’t act you could miss out. If you would like to speak to one of our trusted advisors, then please contact Graham using the contact details below, or click here to email us.