And if you thought pensions and tax were complicated enough already, Google ‘Pensions Tax Relief - Individual Protection from the Lifetime Allowance Charge’, make yourself a cup of tea and enjoy the read. You will be calling your financial adviser within the hour.
What is the fuss about? Well, up to now we have enhanced protection, primary protection (both from 2006) and since last year we have fixed protection - now known (by those in the know) as FP12. This new document brings in the possibility of two new forms of protection, a new fixed protection (FP14 of course) and individual protection (henceforth IP14)
The fixed protection for 2014 works in much the same way as the fixed protection for 2012 did - you apply before 5 April 2014 and you keep the £1.5m lifetime allowance but cannot make any further contributions.
The individual protection allows anyone to have their own protection based in the value of their fund at 5 April 2014 - and you can keep contributing to your pension. So presumably, if you have a fund of £1.4m on 5 April 2014 and you want to keep funding your scheme, you can take IP14 protection and just pay the lifetime allowance tax on the increase from £1.4m rather than taking the drop down to the new £1.25m limit in April 2014.
So there are going to be a lot of people needing advice in the next seven months, remember most financial advisers won't (actually can't) advise unless they know your complete financial picture, and since that takes time, better start sooner than later
Wasn't it this government that wanted to simplify taxation?
- Laurence Slavin is a partner with Ramsay Brown and Partners Chartered Accountants who specialise in the finances of GPs.