Pension Tax Changes Update

Reduction in the Lifetime Allowance from 6 April 2016

In our March paper on Pension Tax Changes, we discussed the proposed reduction of the Lifetime Allowance (LA) down to £1m. The legislation bringing this into force, the Finance Bill 2016, is yet to receive Royal Assent. However the change came into effect from 6 April 2016, implemented by way of a Budget Resolution passed in March 2016.

The effect of the reduction in the LA means that more people will be adversely affected by the lowering of the cap. Exceeding the LA cap can incur a tax charge of as much as 55%. All the more reason to consider what can be done for those who are close to breaching that limit.

One option is to offer employees membership of a separate death in service scheme that provides them with lump sum death in service benefits outside their pension scheme. Arranging the benefit this way means that the death benefits do not count towards the lifetime allowance. 

We can assist in preparing the documentation setting up the scheme. Alternatively, if your provider has produced the documentation we can review the documentation to ensure its legal efficacy. 

For further information contact Andrew Campbell on 020 7329 9090 or acampbell@doyleclayton.co.uk.