The annual pension contribution allowance - currently set at £50,000 - is being reduced to £40,000 for the 2014/15 tax year. Pension fund contributions made above this limit are subject to tax charges at your marginal tax rate.
The lifetime allowance, which is the maximum amount an individual can build up in their pension pot without triggering a tax charge, is currently £1.5 million but is reducing to £1.25 million for the 2014/15 tax year.
Contributions you make to your pension fund over and above this limit could be subject to a 55 per cent tax charge when you reach retirement.
Reductions in these thresholds were announced in Chancellor George Osborne's Autumn Statement speech in December. The Chancellor said that the reduction in the annual and lifetime allowances would save the public purse £1 billion a year by 2016/17 and said that only two per cent of people currently approaching retirement has a pension pot worth £1.25 million or more. Mr Osborne said it was 'fair to look at the tax relief we give to the top two per cent' in order to 'help the great majority of savers.'
We can advise you on lifetime allowances.
Hopper Williams and Bell Limited (HWB) is not authorised under the Financial Services and Markets Act 2000 but, in certain circumstances, we are able to offer a limited range of investment services because we are ICAEW members. We can provide investment services if they are an incidental part of the professional services we have been engaged to provide.