The Summer Budget revealed more changes to pensions in 2016/17 and launched a consultation on the future of pension tax relief.
There were four important pension announcements in the Summer Budget:
- The lifetime allowance, which broadly sets the maximum tax-efficient value of all your pension benefits, is to be cut by 20% to £1m from 6 April 2016.
- The annual allowance, which broadly sets the maximum tax-efficient total pension contributions for a tax year, is to be cut back for high earners from 2016/17.
- There has been an overhaul of ‘pension input periods’, which determine the tax year to which a contribution relates for annual allowance purposes. All pension input periods will now coincide with tax years.
- The government launched a consultation paper on “Strengthening the incentive to save”, examining the future of pensions tax relief. The paper notes that the gross cost of all pension relief meant “the government sacrificed nearly £50 billion in 2013/14”.
This quartet of actual and possible changes means that it is important to review your pension arrangements.
The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice. The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Occupational pension schemes are regulated by The Pensions Regulator.
The information in this article does not constitute advice and should be used for informational purposes only. This content has been provided to Helm Godfrey by Taxbriefs.