Budget 2013 Pension Allowance Cut

Budget 2013 Pension Allowance Cut

The smallprint in the budget report reveals and real nasty of pension allowances both the annual allowance and the lifetime allowance.

The Lifetime allowance is the maximum you can have overall in a pension scheme for your lifetime.  If you exceed it, your face a yearly tax charge.  This has been gradulally falling so that additional taxes can be levied on the 'pensions wealthy'.

The Annual Allowance is the maximum your pay into a pension fund each year and gain tax relief.  This has been falling to stop higher earners investing large sums into pension funds to gain tax relief.

Currently

Lifetime Allowance - £1.5m (unless yours is protected)

Annual Allowance - £50,000 - the maximum you can pay into a pension fund this year.

Tax Year 2014-15

Lifetime Allowance reduces again to just  £1.25m (unless yours is protected)

Annual Allowance reduces to £40,000 meaning you can pay less into a pension fund each year.

This all becomes even more complex as you can only pay into pensions schemes what you did in the "pension input period".  For some, if you do not make larger pensions contributions soon, you may not be able to do so next year and then into 2014/15. 

Contact us urgently for advice if you are a higher earner and you need to plan your pension contributions.