Making The Most Of Pension Legislation Changes

The end of the tax year is fast approaching and more and more rumours on the contents of the Chancellor’s pre-budget report are surfacing in the media – especially where pension legislation is concerned. 

The rumours receiving the most column inches are a further reduction in the Annual Allowance (how much you can pay into a pension and get tax relief) and the reduction in the Standard Lifetime Allowance (how much your pension can be worth before attracting tax charges).

Below are some things to think about to help maximise your pension provision, minimise taxes and protect what you have:

  • Contributing to your pension to reinstate the Personal Allowance where earned income takes you into the £100,000 to £114,950 bracket.
  • Make the most of the “use it or lose it” Capital Gains Tax (CGT) Annual Exemption of £10,600 by crystallising capital gains up to the allowance and make a contribution into your pension to receive further income tax relief.
  • Similarly you can use pension contributions to reduce a gain liable to CGT from 28% to 18% where taxable income is hovering around the basic rate limit through payment of a pension scheme contribution.
  • There is still time to pay up to £200,000 into your pension by utilising the current £50,000 Annual Allowance and carry forward rules that allow the previous 3 years allowances to be rolled into the current tax year. This amount may be slashed if the Annual Allowance Budget rumours are true.
  • If you have total pension provision that is, or you expect to be, in excess of the Standard Lifetime Allowance now or in the future; you have a limited time to elect for Fixed Protection. This will mean your personal Lifetime Allowance will be frozen at £1.8M rather than the reduced £1.5M with effect from 6 April 2012. Elections must be with HM Revenue & Customs by 5 April 2012.

One other retirement matter that is rightly receiving press attention at the moment is the Association of British Insurers (ABI) latest code of practice for Annuity providers.

Currently one third of annuitants just elect to receive their income from their current pension provider unaware that by shopping around for an annuity they could greatly increase their retirement income.

The new code states that Annuity Providers must now make it explicitly known to those approaching or considering retirement that they can shop around for a better deal and do not have to accept what their current provider is offering.

Swindells FP are experts in pension and retirement advice and can help you with all of the above strategies and look at the best route for you when you come to draw an income from your pension assets.