There’s one thing that’s certain with pensions: by the time you come to draw yours, the rules will have changed several times.
In the 2011/12 tax year, the maximum tax-allowable contribution to pension schemes has been cut to £50,000, with some complicated rules about using the limit of the previous three years if you didn’t pay £50,000 in each of them (even though the maximum was different under the previous rules).
If you retire with a pension pot bigger than your ‘lifetime allowance’, there’s a tax charge. In 2011/12, the limit is £1.8m. On 6 April 2012 it falls to £1.5m – still a lot of money, but the charge will be significant for someone who has a pot larger than that. You can apply for ‘fixed protection’ which avoids the charge on up to £1.8m, but restricts the amount you can contribute to a pension fund afterwards.
If you want some help understanding what you can put into pension funds, or whether your pension fund might trigger the lifetime allowance charge, we can help.
For more information about Pension, Tax and your Business Accounts, speak to Paul Bird at Emslie Bird on 01902 489581
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