Reduction in lifetime pension allowance

Changes: New tax year brings pension modifications

A new tax year generally brings changes that individuals need to be aware of.

Pension legislation is one area that has been in the spotlight over recent years – and 2016 is no different.

One of the key changes that will impact many individuals is the fall in the Lifetime allowance from £1.25 million to £1m.

If you are still accumulating your retirement provision, you’ll want to know what to do when the lifetime allowance reduces to £1m on April 6 2016 and if this affects you.

Whether you are deciding whether to continue accruing pension funds after April, or are retiring after April and are close to the £1m limit, protecting your lifetime allowance means that you may be able to mitigate any potential tax charge that will be payable on funds in excess of the new threshold.

Even if you haven’t reached close to £1minyourpensionfundatthemoment, it is important to consider future contributions and growth in the capital value of your pension fund and to take into account future career progression.

Business owners holding their business premises within their pension fund will also need to factor in the potential for uplift in property value by the time they retire and when the sale proceeds are paid to the pension fund.

If you want to protect the pension fund you have, and keep your lifetime allowance at £1.25m, and if you’ve not previously protected your pension funds, you’ll be able to apply for Fixed Protection 2016 or Individual Protection 2016.

You’ll need to know the total value of your pension savings including any pensions already in payment to assess whether protection is necessary for you.

Although intended to be a simple process, this can be complicated if you have multiple pension arrangements in place.

Fixed Protection 2016 will allow an