New tax and pension rules traditionally come into effect in April, and this year is no exception.
There is no shortage of information on the web about the changes, much of which goes into a fair bit of detail. But as with all things financial planning, the number one question people ask is “what does it mean for me?” And that’s why having an Independent Financial Advisor is the norm for so many people. If they’ve got a good one, they’ll already be well aware if they are affected and may have done something about it. But for those of you haven’t had this luxury, I’ll summarise briefly what’s happening and let you know if you MIGHT need to seek advice…
The maximum that you or your employer can pay into your pension each year is £50,000. This will now drop to £40 000 from April 6th. Check to see if you fall into that bracket on your contributions (and you employers) first. Some of you may be using what is called “carry forward” which does allow a little flexibility and again you are in the “be aware” group. Both groups, I would suggest, should take independent advice and overpayment will incur tax penalties.
The second change is to the lifetime allowance – that’s the amount of money you (and your employer) can contribute to your pension overall. It was recently reduced from £1.8 million to £1.5 million. But on April 6th, the figure will decrease to £1.25 million. Should you be aware of take action? Well, check the size of your pension pot and if you’re in or near that bracket, then take advice. Many of you will not be affected, but for those who are, you can apply for various levels of what is called “protection”, but you need to move quickly.
I hope that helps. I’ve tried to stay clear of fact overload and give you an idea of whether you need to be aware or take action. As always, take independent advice – it’s the best way J. John.