Budget – how will it affect your pension? #pensions #ukpensions #pensiontransfer #retiringabroad #IN
09 Sunday Dec 2012
The lifetime allowance for tax-free pension savings is to be cut, the Chancellor, George Osborne, announced in the Autumn Statement.
As was widely predicted, the Chancellor cut the annual pension allowance from £50,000 to £40,000, and at the same time reduced the total lifetime limit on pension savings from £1.5m to £1.25m.
This will not come into affect until the 2014/15 tax year, however, giving many wealthier savers the opportunity to boost pension contributions now, although those who exceed the lifetime limit will face a punitive tax charge. The Chancellor said this decision would affect only around 1pc of the population as the average contribution into a pension plan was just £6,000 a year.
However, it is feared that this reduction will also hit those who are in generous final salary schemes, who may be on more modest salaries. This is because a significant pay rise, which would increase the contribution made to their pension scheme, could push them over the limit and land them with a tax charge. For example, those on a £50,000 salary, who have been members of a final salary scheme for 25 years, would exceed the annual pension limit if they receive a pay rise of 10pc a year or more.
This article is for information purposes only and does not constitute advice. All views in this article are opinions of the Expats Pensions team. We specialise in helping people that have left the UK evaluate the possibility of taking their UK pension with them. For further information please visit http://www.expatspensions.com
For details on claiming your state pension you can visit the UK government website: https://www.gov.uk/state-pension-if-you-retire-abroad