Pensions Tax Support
Information on Pensions Tax Support
Pensions savings are subject to HMRC limits and these limits are changing again from April 2016, meaning that more people in public service pension schemes may be affected and face a tax charge on their pension.
Those who are above the limits, or who are likely to exceed them in future, should consider the impact of tax limits on their pension, understand the options available to them and be aware of their obligations to HMRC should a tax charge arise.
It is the member’s responsibility to ensure that they pay any tax due on their pension savings. If they fail to understand their responsibilities in relation to the Annual and Lifetime Allowance there is a significant risk that senior employees will fail to declare tax liabilities.
The limit on the tax efficient pension savings that can be made in any one year, the Annual Allowance, reduced from £50,000 to £40,000 with effect from 6 April 2014. At the same time, the Lifetime Allowance (the overall limit on the value of pension benefits an individual can take at retirement before tax charges become payable) reduced from £1.5m to £1.25m. This will further reduce to £1m from April 2016.
In the July 2015 budget a new tapered Annual Allowance was announced. This will restrict pensions tax relief for anyone whose earnings, including the value of employer and member pension contributions, exceed £150,000 if their earnings net of member pension contributions are over £110,000.
Protection against the Lifetime Allowance is available to some people and so members need to consider whether to apply for this.
MyCSP provides a service to pension schemes and participating employers to help you and your senior staff understand the impact of changes to pensions taxation.
Pension Savings Statements will be issued in late summer/autumn for members whose Civil Service pension savings breached the Annual Allowance in the previous tax year. These members need to be aware of their responsibilities to calculate and pay any tax due and the associated options and deadlines. MyCSP’s sessions provide guidance and support to ensure employees make informed decisions about their retirement.
The new 'alpha' Civil Service Pension Scheme was introduced in April 2015. The way in which members who move the new scheme will earn pension has changed and this could impact the amount of tax payable.
For more information, please view our training pages.
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