Act NOW to protect yourself against the pension Lifetime Allowance

Sunday 13 March, 2016

From April 2016 the pension Lifetime Allowance is being reduced from £1.25million to £1.0million.

Richard Porter, Director & Financial Adviser, Lonsdale Services, St Albans, Hertfordshire said: ‘You could lose £137,750 in tax if you withdraw a lump sum of £250,000 from a pension valued at £1.25 million.’

Exceeding the Lifetime Allowance will have tax consequences, 55% on any lump sum withdrawals and 25% if the funds remain in the pot; to be further taxed if taken as income.

Act now – Contact our pension specialist Richard Porter on 01727 845500, or complete our enquiry form and he will calculate the current cash equivalent value of your pension and the future value at your intended retirement date. 

Richard Porter said: ‘The Lifetime Allowance changes will not just affect those already close to or above the Lifetime Allowance. Those entitled to final salary pension benefits or high earners who are a long way from retirement will need to act.’ 

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Are you a member of a Final Salary Pension Scheme?

Your annual retirement pension due from any ‘Final Salary’ or ‘Defined benefit’ pension should be multiplied by 20 to work out the amount of Lifetime allowance used.

For example: If your pension  is worth £40,000 p.a., the value is equivalent to £800,000 of lifetime allowance, but in addition you must add any separate tax free lump sum that will be paid to you.  If you are going to exceed the Lifetime Allowance call us on 01727 845500 or complete our enquiry form.

Are you a high earner but some way off retirement?

For example take a 50 year old who will retire at 65, who is contributing £2,000 per month into a money purchase pension that is currently valued at £600,000.  Assuming a net return of 6.15% his fund value will equal £2,061,867 at retirement, but in 15 years the lifetime allowance will only be £1,276,073; leaving £785,794 subject to a tax charge.

If you have a money purchase pension scheme, and make monthly contributions you could exceed the future Lifetime Allowance. Take action now and call us on 01727 845500 or complete our enquiry form.

Lonsdale Services operate offices in St Albans, Barnet, Harpenden, Leeds, Stafford, and Ware, supporting a variety of wealth management and employee benefit clients across the United Kingdom.

Please note: The value of tax relief depends on your individual circumstances.  Tax laws can change.

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