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Unintended consequences’ of pension changes

Employers and employees need to be made aware of the full consequences of tapering and lifetime allowance changes, warns Darren Laverty, Partner at Secondsight.

From 6 April 2016, the annual allowance will be tapered from £40,000 for those with earnings of £150,000 or more down to £10,000 for those with income of £210,000 or more.

Another major change is the reduction of the lifetime allowance from £1.25m to £1m. After April 2016, anyone who breaks through the £1m threshold may be liable to 55% tax on any amount over the limit if the excess is taken as a lump sum.

An unintended consequence is that most ‘death in service’ benefits paid out will count toward the £1m – a factor which could leave a bereaved family with less than half of any expected pay out, once the tax is taken.

So what should companies and individuals do to mitigate these risks and protect themselves?

Read the article featured in Professional Paraplanner in full, here.