As of 6 April 2012, this was reduced from £1.8m to £1.5m. A further reduction to £1.25m will take place on 6 April 2014.
If you have a pension pot that you expect to be over £1.25m by the time you take your benefits, you can apply for protection to retain the higher £1.5m lifetime allowance. There are conditions attached that include making no further pension contributions. There are two forms of protection available, both of which can be applied for, but one must be claimed by 5 April 2014.
This situation applies to more people than is immediately apparent.
Consider two examples with no further pension contributions:
- You are now 45, looking to retire at 60 and currently have a pot of £450,000.
With average annual growth higher just 7%, your pot will exceed £1.25m by the time you retire.
- You are now 40, looking to retire at 65 and current have a pot of just £225,000.
If we again assume an average annual growth rate over 7% , your pot will be over the threshold when you reach 65.
Please note that one of the condition for this protection to remain in place is that you do not make further pension contributions so Once auto enrolment arrives for you, you will need to opt out of it within 1 month in order to retain this protection.
If this siuation might apply to you, you should take proper professional advice as soon as possible.
Bear in mind that if you have a reasonable pension pot and you are in a position to make additional contributions this year, it may be advantageous to do so.
If you have further questions or would like an introduction to a very helpful wealth planner, who can review your pension arrangements, please drop me an email ( philip.gale@businessorchard.com )
If you know of someone else who may be affected by this, please pass this on.
Failure to act now could be very expensive.
