Tax increases, the introduction of the annual allowance and lifetime allowance, the potential increases to contribution rates are all factors which are focusing minds. At the same time the Hutton review is calling for increases to retirement ages and the introduction of career average schemes.

But this may be hasty and it is important to consider all your options at or close to retirement.

If you are caught by these issues and would welcome a discussion on your retirement planning why not call me on 01204 663904 or email phil@white-well.co.uk

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

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

This exemption is to be removed in the new regime.

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

Could a two tier system of ill health be upon us.

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

The new rules have not amended the application of tax relief on pension contributions for basic rate tax payers.  However, it has for high earners and removed the anti-forestalling measures which meant high earners would have only received tax relief at their highest marginal rate up to £20k (or £30k for ad hoc contributions) unless protected.  This simplification is to be welcomed.

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

Under the new legislation these rules are to be kept, with transitional rules to cover anyone who has already started a PIP that covers the April 2011/12 tax year and its lower annual allowance.

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

To work out the annual allowance opening and closing values for pension inputs, my client confirmed, that the BMA use a factor of 19 times.  This is a very helpful shortcut to the long winded calculation methodology set out in HMRC’s guidance (and on some of the examples on this site!)

It is also enables you to work out what the minimum increase in pension accrual each year in the NHS Pension Scheme can be without the Annual Allowance charge applying.

If the annual allowance stands at £50,000 then the maximum extra pension accrual in the NHS Scheme can be is £50,000 / 19 = £2,631 per annum (without an annual allowance charge applying). 

This should be considered against current and future accrual in the NHS Scheme and any future salary rises.

If this issue affects you, please feel free to contact me to discuss matters further.

But it does take some interpretation so if you would like a discussion with a highly qualified adviser,
please call us – 01204 663904.