Changes to Annual Allowance and how they might affect you
David Walker, Senior Tax Manager and Andrew Purcell, Healthcare Services Tax Manager discuss annual allowance and how recent changes may affect you.
Annual allowance was introduced by the government to restrict the amount of tax relief that individuals can claim on pension contributions. It is an allowance where if you make contributions above a limit, you may suffer an additional tax charge.
However, for NHS pension scheme members and members of other defined benefit schemes the annual allowance isn’t a restriction on the level of contributions as such.
David and Andrew also discuss
• The capital value of the pension at the start and end of the tax year
• Benefits in two schemes – even though you have transitioned to the 2015 scheme, you will still have growth in your 1995/2008 pension
• Changes in standard allowance – reduced from £50,000 to £40,000 in 2014/15
• Tapered annual allowance 2016/17 onwards, with as little as £10,000 available
• Electing for the scheme to pay tax charges. There will be news out in the week ending 12 October 2018. The NHS Pensions Agency will now accept, for 2017/18 onwards, a scheme pays election on excesses over your tapered allowance rather than just the standard allowance as before. This could have significant cash-flow benefits compared to the previous year.