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Dealing with the effects of reduced pension allowances
KEY POINTS
- The annual and lifetime allowances in a nutshell.
- Timing of contributions for the annual allowance.
- Protection for lifetime allowance reductions.
- Elect for fixed protection 2014 and individual protection.
- Care with QROPS.
When the “simplified” pension tax regime was launched in April 2006 it introduced two main pension allowances. These set out the limits on the tax-favoured pension savings available from registered schemes.
The annual allowance sets the annual limit of inflows of value (“total pension input amount”) to an individual’s pension funds without incurring tax charges. Each scheme/arrangement of the individual has a pension input period which is used in the assessment of whether the annual allowance has been exceeded.
The test is undertaken for each tax year and is based on the aggregate increase in...
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