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Pensions for individuals - Budget 2013

As with many previous Budgets and Autumn Statements, I nervously waited for the Chancellor to utter the word ‘pensions’ along with a raft of notices concerning variation of pension tax allowances.  On this occasion the Budget revealed no obvious new adjustments to limits, which was a pleasing departure from recent trend.

To summarise the current position:

•  For the 2013/14 tax year, the Annual Allowance (AA) remains at £50,000, with it falling to £40,000 in 2014/15.
•  For the 2013/14 tax year, the Lifetime Allowance (LTA) remains at £1.5million, with it falling to £1.25million in 2014/15.  Some protection is available for existing  pension savers who exceed the £1.25million limit, or believe they will by the time they retire.
•  Full higher marginal rate tax relief on personal contributions remains in place.
•  Tax-free cash rules remain unaltered.

So far, so good.  Then I read the Budget notes, which revealed some new information on proposals for those who have large pension funds in particular:

◦  Individuals with existing A-day Primary or Enhanced Protection, but who do not have lump sum protection, will retain a right to a lump sum of £1.5million (this is a good thing, and is better than what happened when the LTA reduced from £1.8m to £1.5m).
◦  One of the two options being considered for the ‘2014 LTA protection’ is still not yet defined.  A consultation will open in the spring, with final details not emerging under the Finance Bill 2014, which seems to leave little time for making firm plans.

The final piece in a puzzling jumble of missives that were not in the main Budget, was the announcement of a consultation into allowing residual property investment in Self-Invested Personal Pensions (SIPPs) in some instances (mainly allowing investment in development of unused commercial property space for residual use, it would seem).

Planning remains complicated for people who have existing pension provision approaching the LTA in particular, but with the continued availability of higher rate tax relief and also a tax-free lump sum at retirement they remain a compelling vehicle for tax-efficient saving.  Our financial planning team are able to assist you in either situation.



Date: 22nd March, 2013
Author: Tony Slocombe


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