LTA Pension Changes – HMRC Set to Scoop the Jackpot?

by | Mar 5, 2014

Share this article

Andrew Sullivan says that inadequate planning is setting up savers for unnecessarily large tax bills

With less than a month to go before the lifetime allowance is cut from £1.5m to £1.25m, a new survey by deVere Group shows that as many as 46% of potentially liable pension holders have taken no action to mitigate the effects of the new legislation which reduces the amount that can be saved tax-free in a pension.

deVere founder and CEO Nigel Green finds it “astonishing that such a high number of savers who have worked hard all their lives to be able to enjoy the retirement they want are putting themselves at risk of being hit with a tax of up to 55%.”

 

One of the possible reasons for such apparent apathy would seem to be a lack of awareness among pension holders that this change could affect them – £1.25m does, after all, seem a long way off to most.

Not so, says Green.

Of the change in ceiling he observes: “It will affect many more hard-working savers than might be expected. Many will reach the threshold sooner than they think, as values of portfolios increase. Even if a pension pot is significantly below £1.25m today, it is perfectly possible – and indeed likely – for many in their 30s and 40s to accumulate pensions savings of £1.25m by the time they retire.”

 

How to Safeguard a Pension?

As ever, professional financial advice is essential, since individual circumstances differ and hasty, ill-considered action could prove disastrous.

But one domestic option that Green suggests is to apply to HMRC for ‘Fixed Protection 2014’ before April 5; expats might consider transferring the pension into the HMRC-recognised Qualifying Recognised Overseas Pension Scheme (QROPS).

The LTA was first introduced in 2006 and was set at £1.5m. By 2010-11 it had been raised to £1.8m, then cut back again to £1.5m, and now to £1.25m, as of April 6 2014. And they wonder why pension fund holders complain about  a permanently shifting tide…

 

Share this article

Related articles

Trending articles

IFA Talk logo

IFA Talk is our flagship podcast, designed to fit perfectly into your busy life, bringing the latest insight, analysis, news and interviews to you, wherever you are.

IFA Talk Podcast - listen to the latest episode