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Treasury confirms annual allowance charges can be met by pension benefits

People hit with annual allowance charges over £2000 will be able to use their pension benefits to meet the payment, the Treasury confirms.

In a statement issued today, the Government says pension schemes will be required to operate the facility only where an individual exceeds the new £50,000 allowance outright within that scheme in the relevant year.

This follows concern that some individuals could experience high charges if their pension value increased significantly in a given year.

Treasury financial secretary Mark Hoban (pictured) says: “We have abandoned the previous Government’s complex proposals and developed a solution which will help to tackle the deficit, but not hit those on low and moderate incomes. We have taken a tough but fair decision.”

In October, the Government announced that the annual allowance for tax-privileged pension saving would be slashed from £255,000 to £50,000 from April, 2011. The lifetime allowance will also be reduced from £1.8m to £1.5m from April, 2012.

The changes will save the Treasury an estimated £4bn a year, around the same as the previous Government’s proposals.

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. More simplification!

  2. Alan E – More simplification?

    Now I’m very confused, as I thought that the accepted word was Complification?!?

  3. I really hope this only applies to DB schemes as DC clients can control the level of contributions and, therefore, can avoid paying above the AA.

    This is just added to the red tape that providers are going to have to think about when changing their systems to cope with teh Finance Bill 2011!

  4. For high earners the whole issue is now very complicated and this just seems like another bodge job to solve a problem that should not exist at all.

    It does not need to be this complicated and there should be a guideline that states any new rules and regulations that creates additional confusion and complexity should not happen.

    Keep it simple please this is so not necessary, even HMRC are confused or they were when I contacted them but were very helpful.

  5. Anonymous 11.52 am

    I was being sarcastic

  6. From anonymous at 11:52 to Alan E – yes, Alan, even I realised that you were being sarcastic.

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