From April 2014 the Annual Allowance (AA) was reduced from £50,000 to £40,000. Any amount over the AA is added to your income and taxed at the income tax rate that applies to you. This could be up to 45%.
However, some individuals may be able to carry forward unused AA from the previous three tax years to reduce or eliminate any AA tax charge. A statement from the NHS will be sent to members whose pension input is more than the AA in the NHS Pension Scheme.
From April 2014, the amount an individual can accumulate within pensions over their lifetime without a tax charge reduced from £1.5m to £1.25m. If pension benefits exceed this amount a 25% or 55% tax charge could be implemented, depending on whether excess benefits are taken as an income or a lump sum.
If a form of Lifetime Allowance (LTA) protection is held, for example Individual Protection, the member's personal LTA will be higher than £1.25m.
This provides a personalised LTA up to £1.5m, based on the total value of pension funds at 5 April 2014. Individual Protection will not be lost by making further pension savings, but those who already hold Primary Protection are not eligible. HMRC must receive applications for Individual Protection by 5 April 2017.
State Pension Age
Following the 2010 election, the Coalition Government reviewed the timetable for increasing the State Pension Age (SPA) and decided to bring forward the increase to age 66. The SPA for women will increase more quickly from 60 to 65 between April 2016 and November 2018.
From December 2018, the SPA for both men and women will start to increase to reach 66 in October 2020. In the Chancellor's Autumn Statement in November 2011, it was announced that in the SPA for men and women will rise to age 67 between 2026 and 2028, rather than between 2034 and 2036 as previously planned.
From April 2015, everyone over 55 with a defined contribution personal pension will be able to access their entire funds, subject to the marginal rate of income tax. The Pension Commencement Lump Sum is usually tax free. Annuities and income drawdown will still be available. If only part of the total pension pot is withdrawn, the remaining funds can continue to be invested.
To discuss how these changes affect you, speak to your Financial Consultant today.
Please use the links to download pdf's regarding Wesleyan's latest guide and Pensions Update