Pension tax support for senior police officers and staff

15 May 2014

From 6 April 2014 the Lifetime Allowance, the maximum pension savings that an individual can amass and still qualify for tax relief over their lifetime, reduced from £1.5m to £1.25m.

Also the Annual Allowance, which is the maximum annual contribution allowed into a pension scheme that qualifies for tax relief in any one year, reduced from £50,000 to £40,000.

Many police officers and support staff could be affected.

Chief Constables and Assistant Chief Constables retiring on full pension may now breach the Lifetime Allowance. Chief Superintendents and higher ranks could also breach the new Annual Allowance if they have more than 20 years’ service. The changes don’t just affect the higher earners; a police Sergeant being promoted to Inspector could breach the annual allowance if he or she has over 20 years’ service.

Anyone earning over £95,000 retiring after a full career may breach the new limits. Even someone earning £45,000 and receiving a significant promotion could breach the Annual Allowance if he or she has over 20 years’ service.

Because the tax charges can appear very high to scheme members it is likely to lead to a number of members considering their options, including early retirement, flexible retirement, opting out of the pension scheme and even leaving service.

The individuals making these decisions will, by definition, be long-standing, relatively highly paid people who may be critical to the functioning of your organisation.

We are therefore recommending that you proactively engage with anyone that might be affected.

The Government has introduced a way for certain people to protect their Lifetime Allowance by applying for ‘Individual Protection’ from summer 2014.

As a specialist in public sector pensions, MyCSP offers pension tax support services service for HR managers and employers to help you and your senior staff to understand these changes and support those who may be impacted. Services include pension tax seminars and one-to-one sessions with senior staff.

If you would like further details on how MyCSP may be able to assist you and your staff with these changes, please read about the services available here or contact us at training@mycsp.co.uk or call us on 01903 835 717.

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