Pensions and investments

Pensions and investments

Reducing the pension annual and lifetime allowances

The pension annual allowance has been £50,000 since 2011/12, but it is being reduced to £40,000 from 2014/15. Unused annual allowance from the three previous ‘pension input period’ years (annual periods commencing from when the pension started or from when the first contribution was made after 6 April 2006 if the pension started before this date) may be carried forward and added to this annual allowance. If an individual’s pension savings for a tax year exceed this total, the annual allowance charge is applied to the excess. The annual allowance charge is linked to the individual’s marginal rate of income tax.

The pension lifetime allowance for an individual has been £1.5 million since 2012/13. It is being reduced to £1.25 million from 2014/15. If an individual receives pension benefits in excess of the lifetime allowance then the lifetime allowance tax charge is applied to the excess. The tax rate is 25 per cent if the excess is taken as a pension and 55 per cent if it is taken as a lump sum.

A transitional protection regime will also be introduced for individuals with UK tax relieved pension rights of more than £1.25 million, or who think they will exceed £1.25 million by the time they take their pension benefits. This is known as ‘fixed protection 2014′ and individuals will need to inform HM Revenue & Customs by 5 April 2014 if they wish to rely on it. The downside of the protection is that individuals in a defined pension contribution scheme must ensure that no further pension contributions are made to the scheme after 6 April 2014.

Individual savings accounts (ISAs)

 

  ISAs:2013/142012/13 
Overall investment limit £11,520 £11,280
Including cash maximum of £5,760 £5,640
 Junior ISA: Overall investment limit £3,720 £3,600
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