The Chancellor of the Exchequer, Rishi Sunak, has today delivered this year’s Budget Report.
Please see pension tax information below;
Annual Allowance:
The Chancellor has raised the ‘threshold income’ at which tapering of the annual allowance (AA) starts from £110,000 to £200,000. The ‘adjusted income’ has increased from £150,000 to £240,000
This means that from 2020-21 individuals with income below £200,000 will not be affected by the tapered AA and the AA will only begin to taper down for individuals who have an ‘adjusted income’ above £240,000. For the coming tax year this means that AA will taper to £10,000 at an adjusted income of £300,000 as opposed to £210,000.
For those on the very highest incomes, the minimum level to which the AA can taper down will reduce from £10,000 to £4,000 from April 2020. This reduction will only affect individuals with total income (including pension accrual) over £300,000.
Lifetime Allowance:
The lifetime allowance (LTA) will increase in line with CPI from £1,055,000 to £1,073,100 in 2020-21.
Jonathan Watts-Lay, Director, WEALTH at work, comments: “Given the implications of coronavirus, it is unsurprising the tapered annual allowance has been adjusted by £90,000 as this will now ensure that most senior NHS staff, can work additional hours for the NHS without their AA being reduced.”
He adds: “With regards to the Lifetime Allowance (LTA), even though the limit has increased, reaching the LTA could be closer than many employees think. For example, they may have a number of pension schemes that when combined with their current pension provision, could exceed the allowance.
The tax implications could be drastic and could lead to potentially many being hit with unexpected and sometimes unnecessary tax bills.
Many workplaces now offer support to their employees in terms of financial education, guidance and advice. This approach helps both the employer and the employee by ensuring employees understand all their options before making what could be life-changing decisions, therefore leading to better outcomes.”