ICR068: Lifetime & Annual Allowance Changes in April 2016
In this episode of the Informed Choice Podcast, Martin talks about changes to the lifetime allowance and annual allowance being introduced in April 2016.
There is also a roundup of the latest personal finance news and an update from the world of Informed Choice.
The lifetime allowance is a limit on the total amount of pension benefit that can be drawn from all pension schemes, either as a lump sum or retirement income, without paying an extra tax charge.
It currently stands at £1.25m and is being reduced to £1m on 6th April 2016.
People with large pension funds or large pension benefits have some options to consider for protection against this lifetime allowance reduction.
In the podcast, Martin talks about Individual Protection 2016 and Fixed Protection 2016, and how these two forms of protection works.
The annual allowance is the maximum you can save into a pension fund and receive tax relief. For the 2015/16 tax year, this is £40,000. It’s also possible to carry forward any unused annual allowance from the previous three tax years.
From April 2016 onwards, higher earners will have a restricted annual allowance. The annual allowance will be tapered down from £40,000 to £10,000, depending on the level of earnings.
Personal finance news update
–Star fund manager Neil Woodford says Leaving the EU would not necessarily damage the UK economy.
–Official figures have confirmed the UK economy grew by 0.5% in the final quarter of last year.
–Lloyds Banking Group has paid a surprise £2bn dividend to investors, boosting shares by 13.6%.
–Royal London has warned that the Budget on 16th March could amount to ‘daylight robbery’ if the Chancellor replaces the current system of pension tax relief with a pension ISA or a low flat-rate of tax relief for all.
–Average house prices have increased by more than the average employees net earnings in more than a quarter of local authority districts across the UK over the past two years, according to the latest Halifax research.
Useful links mentioned in this episode
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