Prior to July 2015 – a £40,000 annual allowance applied to pension contributions each tax year, including those made by you, your employer and any benefits built up in a final salary scheme. Contributions over the allowance do and did not receive tax relief.
A new additional £40,000 allowance has effectively been introduced for contributions made from 9 July 2015 to 5 April 2016.
This means anyone who made contributions from 6 April 2015 to 8 July 2015 might be able to invest more this tax year and receive more tax relief. Anyone who hasn’t made contributions still has the same allowance – £40,000 for contributions up to 5 April 2016.
Contributions registered from 6 April 2015 to 8 July 2015 will reduce this new allowance, but only if they exceeded £40,000. For pension clients, this is the value of contributions made in that period.
This new opportunity is only available until 5 April 2016.
Examples – how much can be contributed up to 5 April 2016?
| Contributions from 6 April 2015 to 8 July 2015 |
Allowance from 9 July 2015 to 5 April 2016 |
| £0 | £40,000 |
| £15,000 | £40,000 |
| £40,000 | £40,000 |
| £60,000* | £20,000 |
| £100,000* | £0 |
* Anything over £40,000 registered in this period uses up the new £40,000 allowance.
Taper Relief Introduced
The Chancellor has also provided for reductions in allowable annual contributions for those people earning over £150,000 but this only applies from April 2016.
Fed – Up , so are we !
One reason that a great number of people are increasingly fed up with pensions is the constant tinkering by politicians and the increasingly complex rules – that even many advisers find difficult to keep up with. The complexities arise because the politicians keep tinkering around the issue instead of dealing with the nub of the problem – that is the very substantial cost to the Treasury of high rate tax relief – they have not got the balls to simply chop ALL high rate tax relief on pensions.
That would do away with the complexities and do away with the need for a cap on the total amount saved in a pension.
The growing complexities favour the rich who can afford to pay people like us to advise them.
Is this really necessary?
Shouldn’t the focus of professional advice not be spent on the constant rule changes as a result of meddling by of politicians but on making sure that the investments in pensions are going to produce the returns that provide people with a decent income in retirement.
I find it difficult to accept that in 2015, despite all of the many changes to regulations and much higher adviser standards – that many pension funds are linked to out dated and poor performing funds, if that wasn’t causing enough damage – there is often no suitable investment strategy specific to pensions linked to the investments.
To summarise professional time is better spent on providing the very best risk and return characteristics for pension portfolios and ensuring that their investment strategy is right. Too often model portfolios fail to satisfy the different characteristics required for investing for pensions AND often fail to take into account the need to provide a strategy to allow for income on a regular basis.
