40k annual allowance

Mick70

how long has it been capped at 40k  ?  for those who know lot more than me on this subject, is it likely to increase over the coming years ?
cheers
mick

Mick70

edit- just noticed it was reduced to 40k in april 2014, having originally been 255k in 2010/11 !   surprised it hasn't increased with inflation since then 

randompenitent

It isn't necessarily 40K if you are a high earner. See https://www.gov.uk/tax-on-your-private-pension/annual-allowance

And take a look at https://www.gov.uk/government/publications/rates-and-allowances-pension-schemes/pension-schemes-rates

Judging from the last few years, there doesn't seem to be any desire to index the allowance.

Albermarle

Mick70 said:

edit- just noticed it was reduced to 40k in april 2014, having originally been 255k in 2010/11 !   surprised it hasn't increased with inflation since then 

Tax relief at 40% is always under a kind of threat of being abolished, but governments have been reluctant to actually do the deed.
So I suppose this is a back door way of slowly reducing  how much benefit can be taken, as presumably the vast majority of people who are affected by the annual allowance are higher earners/ higher  rate taxpayers.

Mick70

Albermarle said:

Mick70 said:

edit- just noticed it was reduced to 40k in april 2014, having originally been 255k in 2010/11 !   surprised it hasn't increased with inflation since then 

Tax relief at 40% is always under a kind of threat of being abolished, but governments have been reluctant to actually do the deed.
So I suppose this is a back door way of slowly reducing  how much benefit can be taken, as presumably the vast majority of people who are affected by the annual allowance are higher earners/ higher  rate taxpayers.

agree about the 40% relief being under threat although doubt they would touch the 20% tax relief as would put a lot of people off from paying into pension schemes .  I guess one answer would be to keep the 20% relief and increase the allowance to 50k , just a guess of course

dunstonh

Mick70 said:

edit- just noticed it was reduced to 40k in april 2014, having originally been 255k in 2010/11 !   surprised it hasn't increased with inflation since then 

It is more likely to go down rather than up.   Keeping it at £40k each year is a passive reduction which achieves the objective of lowering the allowance.

Steve182

dunstonh said:

Mick70 said:

edit- just noticed it was reduced to 40k in april 2014, having originally been 255k in 2010/11 !   surprised it hasn't increased with inflation since then 

It is more likely to go down rather than up.   Keeping it at £40k each year is a passive reduction which achieves the objective of lowering the allowance.

This is exactly what successive governments did with MIRAS (Mortgage interest relief at source). It was kept at £30K from 1983 until Brown abolished it completely in 2000. By that time it was of so little value nobody really cared or kicked up a fuss.

Thrugelmir

More likely to remain where it is. Allowing inflation to quietly and slowly erode the benefit away. An easy way of pickpocketing the taxpayer.  Ultimately will remain at a certain level to incentivise everyone to make basic pension provision. 

Newnoel

The ability to carry forward unused personal allowance from the previous three years is one I would think the chancellor should abolish. It really only benefits the very wealthiest who come in to some sort of windfall

hugheskevi

Newnoel said:

The ability to carry forward unused personal allowance from the previous three years is one I would think the chancellor should abolish. It really only benefits the very wealthiest who come in to some sort of windfall

It benefits many with final salary linked pensions who experience a one-off spike in pension accrual following promotion. Without carry-forward you would see some earning perhaps around £35,000 p/a with long final-salary linked service experiencing a tax charge after a 10% pay increase.

Albermarle

Newnoel said:

The ability to carry forward unused personal allowance from the previous three years is one I would think the chancellor should abolish. It really only benefits the very wealthiest who come in to some sort of windfall

Also judging by the posts on here , it confuses a lot of people !
Not sure about the 'very wealthiest ' but it does of course mainly only  affect people in the Top 10 or 20% , usually higher rate taxpayers filling up their pot in the last few years before retirement .
To the very wealthiest ; £40K is peanuts .