The lifetime allowance for pension contributions is to reduce from its current level of £1.25 million to £1 million from 6 April 2016.
As on previous occasions when this allowance changes there will be transitional protection for pension rights already over £1 million in order to ensure that this change is not retrospective.
From April 2018 it is intended to index the allowance annually in line with CPI, which means that this should be the last of these reductions, which have seen the allowance reduce from £1.5 million.
REDUCED ANNUAL ALLOWANCE
From April 2016 there will be a reduction in the £40,000 annual pension allowance where income, including pension contributions exceeds £150,000.
The annual allowance will reduce by £1 for every £2 of income in excess of £150,000, down to a minimum of £10,000.
FURTHER CHANGES TO PENSION RELIEF
A consultation document was published which will further look at a reform of pensions tax relief. This will include reviewing whether the taxation of pensions should be more closely aligned with the taxation of ISAs.
LUMP SUM DEATH BENEFITS
From or after 6 April 2016, where someone dies at the age of 75 or over, taxable lump sum beneits will be subject to tax at the recipient’s marginal rate of income tax.
Where the recipient is, for example, a trust or a company and therefore does not have a marginal rate, the 45% charge will continue to apply.
The Equitable Life payment scheme will close to new claimants on 31 December 2015. Further endeavours are to be made to trace remaining policyholders due £50 or more. There will be a further payment to Equitable Life policyholders on pension credit who received 22.4% of their relative loss. This payment will be for an additional 22.4% and is to be made in early 2016.