Annual Allowance – Client Example
Posted November 29th, 2010
This is an NHS case I have worked on recently. The client approached me concerned that given he was over 10 years from retirement he would be suffering an annual allowance charge on a regular basis
Background
Pensionable Pay – £127,407
Pensionable Service – 23 years
Current entitlement (Opening value) – accrued values to date (assume early retirement without reduction or enhancement)
• 23 / 80 x £127,407 = £36,629 per annum
• Current lump sum = £109,887
• Pension Input Opening Amount – £36,629 x 16 = £586,064
• Add lump sum = £586,064 + £109,887 = £695,951
• Increase by CPI = £695,951 x 1.03% = £716,829
Next year (assume no pay rise)
• 24 / 80 x £127,407 = £38,221 per annum
• Current lump sum = £114,663
• Pension Input Closing Amount – £38,211 x 16 = £611,376
• Add lump sum = £611,376 + £114,663 = £726,039
Result
• Increase in benefits = £726,039 – £716,829 = £9,210
Therefore, there was no immediate chance of an Annual Allowance charge.
If you would like to discuss your pensions and how you might be affected by the annual allowance, please contact me on 01204 663904 or email phil@white-well.co.uk
