Keep up to date with all the latest changes in the pension world. Scheme and legislative changes can alter your pension pot so it’s important that you read up on all the information in this section.
Restricting Tax Relief for High Earners
The Government intends to introduce a taper to the Annual Allowance, which limits the amount of tax-relieved pension saving that can be made by an individual or their employer each year.
The ’Tapered Annual Allowance’ will be introduced from 6 April 2016 and legislation will be included within the Finance Bill 2015. For every £2 of ‘adjusted annual income’ of over £150,000 in a tax year, an individual’s Annual Allowance will be reduced by £1, subject to a minimum Annual Allowance of £10,000.
Adjusted annual income is worked out by adding to income the amount of both the individual’s own pension contributions and their employer’s pension contributions. However, those with income, excluding pension contributions, below a £110,000 threshold, will not be subject to the Tapered Annual Allowance. The table below illustrates how the Annual Allowance will reduce once income exceeds £150,000:
Adjusted Annual Income Tapered Annual Relief
£160,000 £35,000
£170,000 £30,000
£180,000 £25,000
£190,000 £20,000
£200,000 £15,000
£210,000 and above £10,000
Pension Wise
The Government have put regulations in place to allow pension scheme members approaching retirement to access free guidance as to their options at retirement through ‘Pensions Wise’. The providers of this service with be the Citizens Advice for those who would like face to face guidance and the Pensions Advisory Service for telephone guidance.
From April 2015, Scottish Widows will automatically provide you with information on how to access this guidance if they are aware you are considering your retirement options or accessing your funds. The guidance will be impartial and not involve either Scottish Widows or Sopra Steria.
The Guidance Guarantee standards will be regulated by the Financial Conduct Authority.
Pension Wise is to be extended for those aged 50 and above. This service, which offers free and impartial guidance for members with flexible benefits, is currently only available to those who are aged 55 and above.
Pension scams
With the introduction of the new Pension Freedoms from April 2015 the opportunities for pensions and investment scams have increased significantly. Whilst not necessarily illegal such transfers could well result in a 55% tax charge on the member. Other consequences could be:
- pensions savings may be invested in inappropriately high risk funds;
- the new scheme may levy very high charges; and
- some schemes are set up to defraud the member of a large portion (if not all) of their pension savings.
The Pensions Regulator has issued some guidelines to help members identify possible scams and you are recommended to look at these if you have any concerns at all at: http://www.thepensionsregulator.gov.uk/individuals/dangers-of-pension-scams.aspx
Accessing the Pension Flexibilities
The Government has confirmed again that it will consult shortly on options aimed at making access to the new flexibilities easier, so will examine the process for transferring pension savings from one scheme to another, and will also focus on any excessive early exit penalties. If there is evidence of transfer penalties, they will consider imposing a legislative cap on these charges for those aged 55 or over. The Sopra Steria GPP does not apply any exit penalties.
Lifetime Allowance
The current Lifetime Allowance will be increased from £1,030,000 to £1,055,000 in the 2019/20 tax year. You can read more about how to protect your Lifetime Allowance at www.gov.uk/guidance/pension-schemes-protect-your-lifetime-allowance