There are many ways for your clients to contribute to their Registered Pension Scheme. We accept regular and one off payments from them or their employer. The decision is theirs.
Building a future
Member contributions in any tax year are restricted to the greater of:
- £3,600 gross or
- 100% of relevant UK earnings which are chargeable to income tax (with tax relief where appropriate)
Contributions to all Registered Pension Schemes are subject to an Annual Allowance of £40,000 from tax year 2014/15.
Prior to 6 April 2014, the Annual Allowance for tax year 2013/14 was £50,000.
Your clients can make contributions in excess of this allowance only if they can be accommodated by carry forward.
There is no test against the Annual Allowance in the year in which your client dies or in the case of diagnosis of terminal illness, where lump sums are paid.
Tapered Annual Allowance
From 6 April 2016 the Government introduced on a sliding scale an Annual Allowance for those with higher incomes over £150,000. For every £2 of ‘adjusted income'* over £150,000 the Annual Allowance will be reduced by £1 down to a minimum level of £10,000. The maximum reduction in the Annual allowance is £30,000 therefore anyone with an income of £210,000 or more will have an annual allowance of £10,000.
*The 'adjusted income' definition which includes dividend and interest on savings, also adds-back any pension contributions, to prevent individuals from avoiding the restriction by exchanging salary for employer contributions.
Money Purchase Annual Allowance (MPAA)
MPAA has been introduced to prevent abuse of the new pensions flexibility and choice from April 2015 initially set at £10,000pa. From 6 April 2017 this reduces to £4,000 pa and will apply when:
It does not apply where an individual only takes tax-free cash from Flexi-access drawdown.
Lifetime Allowance (LTA)
A Lifetime Allowance limit is applied on the amount of pension benefit that can receive beneficial tax treatment at retirement. As the limit has changed over time, various forms of LTA protection have been introduced to prevent savers being disadvantaged.