The new £40k annual pension allowance. Suits you sir?

A drawing of a one pound mark and a ruler measuring the pension

Pensions

MoneyPlus Features Team

20th March 2013 at 4:33pm

Well, it used to be £50,000. So, how’s the lower annual pension allowance measuring up for you?

Are you aware you could be starting to fill up your pension allowance from 6 April 2013?

Well, one thing’s for certain, the latest cut to the amount you can pay in may be with some of you sooner than you think.

Plus, there’ll be no automatic warning that you’re quickly filling up your £40,000 limit.  Or that if you go over this, you may have a tax charge.

Early action

What’s needed is early action.

These latest alterations will be introduced from tax year 2014/15.

But many will see their payment limits snipped down to size in a matter of weeks rather than in a year’s time.

This is because it’s payments made in a time frame called the ‘pension input period’, rather than tax year which are tested.

Post 5 April 2014

If the end of your pension input period falls after 5 April 2014, then your pension payment will already be subject to the new £40,000 limit.

Pension input periods were introduced as part of a major pension simplification process. (We know, it’s hard to believe isn’t it?)

Pension input periods were introduced as part of a major pension simplification process.

For many, the date of the first payment after 6 April 2006 will have set their pension input period.

If you were making monthly payments into a pension at that time you may now be faced with a pension input period which ends in April each year.

So, if you think this may affect you, it’s important that you find out what your pension input period is.

Because it could mean that you’ve barely put a foot into the new tax year and you may already be using up your 2014/15 annual allowance.

Ok, so you’ve waited long enough. Now here’s the good news.

The carry-forward rules allow you to go back and claim three years’ worth of unused allowance.

Which means you could still make an XXL one-off payment to your pension.

Suits your sir? Absolutely.

Read our blog posts to find out more.

Every person’s circumstances will be different and require advice. Standard Life Savings accepts no responsibility for advice that may be formulated on the basis of this information.

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