It was only last April when we saw the abolition of the lifetime allowance charge. There was also a significant increase in the pension annual allowance from £40,000 to £60,000 a year.
Since then, Rachel Reeves has commented on Pension Tax Reliefs being too generous.
Could the following change?
- Limiting Pension Tax Relief for individuals to basic rate (20%) or possibly the introduction of a 30% flat rate
- Limiting or abolishing the 25% tax free lump sum
- Freezing or reducing the £1,073,100 lump sum and death benefit allowance
- Subjecting an undrawn pension fund to Inheritance Tax (IHT)
- Limiting the amount of employer pension contributions paid by way of salary sacrifice arrangements.
Have you considered bringing your pension planning forward just in case changes are effective from 30 October 2024?
Do you know how much extra you could contribute into your pension before 30 October 2024 to mop up unused reliefs that have built up from April 2021 to attract tax relief at your highest rate of income tax?
Under current rules, many pension funds allow their members to withdraw up to 25% of their pension savings tax-free – subject to a cap of £268,275 unless you are lucky enough to benefit from protection at a higher amount. There are rumours that the tax-free amount may be limited to £100,000. If you are over 55 years old, have you spoken to your financial adviser about extracting your tax-free lump sum?
If you decide to reinvest some of your tax-free lump sum in a pension fund – there are some nasty traps for the unwary which need to be discussed with your financial adviser.
Have you banked 35 qualifying years for a full state pension?
In order to receive a full State Pension, you need 35 qualifying years of National Insurance Contributions.
Topping up your ‘missing years’, by paying voluntary Class 3 National Insurance contributions (or Class 2 National Insurance, if you are self-employed) is a financial decision.
Normally you can only go back six years to make up missing contributions but there is currently an opportunity to fill up missing years going back as far as 2006/07.
The deadline for the extended carry back is 5 April 2025.
