Wednesday, 2 May 2018
Figures collected by the FT show that more pension savers are being hit by the Lifetime Allowance (LTA), which caps the value of pension savings at £1.03m (in tax year 2018/19 - it will rise with inflation each year). Pension savings above this level are taxed at either 25% or 55%, depending on what the saver does with the excess.
According to HMRC the tax collected for LTA breaches jumped to £110m in 2016-17, from £40m in 2014-15. The number of people caught out more than doubled from 1,020 to 2,410.
Of course, this is still a very small number of people compared to the numbers that pay other forms of tax, and most people would laugh at the idea of accumulating a pension worth £1.03m.
The calculation of how much LTA you will use up when you retire is as follows:
There are ways to mitigate your risk of paying LTA tax charges, including protections that can be applied for that grant a higher lifetime allowance. If you want advice on whether you should be doing something to plan for the Lifetime Allowance, just get in touch.