The information contained within the following news articles have been pre published. The articles were published on the dates indicated and the information contained within these issues include references to taxation, legislation, regulation and other issues or concerns that may no longer apply
Pension planning before tax year end
With the end of the tax year fast approaching, significant changes lie ahead in terms of the funding rules that will apply for private pension provision from next tax year.
Part of the short-term advice we’re offering our clients here at Census is to ensure that contributions being funded into registered pension schemes not only receive tax relief in the tax year in which they are paid but are set against the annual allowance of the same tax year. We believe this is especially important given that the annual allowance is reducing to £50,000 from next tax year.
The annual allowance against which contributions and accrual under defined benefit schemes are tested is based on when a client’s pension input period ends. For many individuals, this means that contributions paid in one tax year could be set against the following tax year’s annual allowance.
Some schemes allow clients to request that scheme administrators amend historical pension input periods to ensure they are aligned with the tax year in which contributions have been paid. This for many clients will have the benefit of freeing up both the 2011/12 annual allowance and maximising the carry forward of unused annual allowance, that will also be available from the beginning of the next tax year, from the pension input periods ending in the three previous tax years.
Changes in legislation mean that such retrospective action will not be available from the beginning of the next tax year so time is short to act. Care is needed where clients have been accruing benefits through a number of schemes. Any action regarding changes to pension input periods in one scheme, where significant contributions have been made in the past to other arrangements, will require careful analysis before any change is implemented. Failure to do so could result in the annual allowance being exceeded, resulting in the client being subject to an annual allowance tax charge brought on by that change.
Chartered Financial Planner