MyCSP supports City Health Care Partnership's employees with pension tax guidance
9 Jul 2014
MyCSP, the first mutual joint venture to spin out of UK central government, which provides pensions administration for the country’s best known public sector organisations, is guiding City Health Care Partnership’s employees with regards to the pension tax changes.
The recent changes to the Annual Allowance (AA) and Lifetime Allowance (LTA) are a complex area of pension tax. MyCSP is committed to helping employers understand the impact of the changes and keeping their members informed.
From 6 April 2014, the Annual Allowance, which is the limit on the tax efficient pension savings that can be made in any one year, reduced from £50,000 to £40,000. At the same time, the Lifetime Allowance, which is 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.
“Following reductions in the pension taxation limits, thousands of pension scheme members could now face a tax charge on their workplace pension, which could create real challenges for employers,” explains MyCSP’s Business Development Director, Virginia Burke. “Employers face the possible scenario that many of their long-standing, highly-valued employees, who are critical to the organisation, may choose to leave the organisation rather than face a tax charge. Our pension tax sessions enable members of occupational pension schemes to understand the options available to them and help avoid what can sometimes be knee-jerk reactions to potential tax charges”
The lowering of the tax limits means that many more people are affected, and the salary which someone must typically earn before breaching the limits has reduced, For example, those earning from £90,000 who retire after a full career may now breach the Lifetime Allowance and face a tax bill of up to 55% on the excess. Senior employees who earn more than £100,000 a year may breach the new Annual Allowance and face tax bill at their marginal rate on any excess.
“The reduction in the allowances will not only affect the highest earners,” says Virginia. “Even someone earning £45,000 and receiving a significant promotion could breach the Annual Allowance if he or she has over 20 years’ service.”
“Members now must take a wealth of factors into consideration, such as when they intend to retire, the mix of pension and cash they wish to take at retirement, whether they have pension savings from other sources and what future inflation and pay rises are likely to be,” says Virginia. “Protection has also been introduced for members whose benefits already exceed the new Lifetime Allowance and members should consider whether to apply for this as well. There are a number of complexities to deal with.”
MyCSP is supporting the City Health Care Partnership with communicating the changes and supporting their employees.
Like MyCSP, the City Health Care Partnership is employee owned. It provides community health and integrated social care services to over a half a million local people in Hull, the East Riding of Yorkshire and Knowsley, Merseyside and employs approximately 1,500 people.
Andrew Burnell, Chief Executive, City Health Care Partnership, explained: “We were keen to support our people through these changes and assist them with their future career decisions. MyCSP has a wealth of experience in this area and the information provided in MyCSP’s sessions will help with that decision-making process.”Back to news