MSE News: Autumn Statement: Pensions tax relief limit to drop

gadgetmind wrote: »

There is also the restoration of the 120% GAD cap to soften the blow.

Good news.

Hopefully gilt yield index 'floor' of 2% not reduced to compensate ?

"Pension provider A J Bell says it has been told by HMRC representatives that the change will require legislation. Draft legislation will be produced before the next Budget, although the actual date of implementation will depend on the outcome of discussions between Government officials and the industry".

While I'd like immediate and including all in-force caps that were calculated based on 100%, that looks to me as though it'll be at least the middle of 2013 before it can happen.

The reduced Lifetime Allowance makes it more important than before to commence taking benefits at 55 even if there's no intention to retire then. That'll get the percentage of the lifetime allowance used as low as possible because there will have been fewer years of growth. Some people who do this will also need to take out life assurance so a non-spouse/dependent beneficiary on their death doesn't suffer from the 55% tax charge that starts once benefits are taken. If the income isn't needed it can be reinvested into a pension or just not taken.

I'd assume 50k but intend to use all of my carry forwards by then.

Interestingly, even though the limit before 2011 was £20k for many due to Special Annual Allowance, it's still assumed to be £50k for carry forwards.

I can feel some PIP fu coming along for me in 2013/14/15!

There are two protection plans announced, one for sometime in 2013 and another with consultation that might take it to 2014.

Remember that the percentage of lifetime allowance used is calculated at the time of crysalisation/taking benefits and never again for that pension pot, however much it grows to later. If you're 55 or older you can do that now to get a percentage of the current 1.5 million limit before it drops to 1.25 million. You don't need to take the income, you can use income drawdown and not take income if you like. Assuming it's a personal pension of some sort. Best to take the maximum lump sum if it is a personal pension, you can reinvest that outside the pension, or recycle it within the recycling limits if you prefer.

Just get in before the limit drops and you may not need the protection because the crystalisation may keep you below the lower limit.

Clifford_Pope wrote: »

When the £255,000 limit was cut to £50,000 the carry forward allowance was reduced to £50,000 retrospectively for the previous years when it had been higher.

Yes, as I said in my PP. However, the drop then was massive, if they'd allowed carry forwards of the full £250k for 3 years it would have defeated the whole purpose of the new cap - allowing someone to potentially put in £800k+ !!