Enable’s experienced IFA’s in Bishop Stortford have been helping many mange the pension aspect of their financial planning recently. Pensions have become increasingly difficult to understand, especially for those in final salary schemes and higher earners and more twists and turns to make sense of are on their way.
As expected by many, the amount that can be saved in a pension free of tax over the course of a lifetime is to be reduced from £1.25m to £1m from April 2016. If your pension savings are more than £1m by that date, or you think that what you have already saved will have grown to more than £1.25m by the time you take your pension, it is likely that you will be able to protect the funds you already have, as long as you do not put any more into the pension. This is known as “fixed protection”.
Currently you can contribute up to £40,000 a year into a personal pension scheme. If you have a “defined contribution” employer scheme, the total of employer and employee contributions must not exceed £40,000. Under the new rules announced in the Budget, this £40,000 allowance will be reduced for those whose total income is above £150,000. In working out whether your income is above £150,000, you need to include the value of any pension contributions you make, any pension contributions made by your employer, and the increase in value of any final salary scheme over the tax year, “adjusted income”. For every £2 of adjusted income you have over £150,000, your annual allowance will be reduced by £1. The maximum reduction is £30,000, leaving an annual allowance of £10,000. So once your income is over £210,000, there is no further reduction.
Some of the changes are highly technical so before you make a contribution to your pension, you should find out whether they make a difference to your position.
Issued by: Enable Independent Financial Life Planners 25c North Street, Bishops Stortford, Herts CM23 2LD Telephone: 01279 755950 – Fax: 01279 657339 Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority. It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us. NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE