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TonyTax
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I am 55, hoping to retire at 60, but concerned about the

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I am 55, hoping to retire at 60, but concerned about the changes that are coming in to effect in April 2016. I have a DC pot valued at £ 1,073,000 plus two pensions in DB arrangements. My anticipated taxable income for the next few years will result in
me having a £10k annual allowance. 19% of my salary goes into my pension, 3% by way of salary sacrifice, 16% contributed by my employer. My contribution history looks like this : PIP PF contributions 2012 27,930 2013 37,690 2014 28,358 1/1-8/7/15 14,459 9/7/15-5/4/16
14,487 Total 122,924 My questions are : i) Will there be any protections available for people with pots > £1m ? (As when they brought it down to £1.25m) ii) If my contributions continue at the current rate (£ 29,450) will I get a tax charge of £ 8,752.50 (being
45% of contributions > £10k) in the tax year to 5/4/16 or 17 ? iii) Can I carry forward unused annual allowance from previous years beyond 2016 ? ie continue to contribute at my current rate without incurring tax charge until I have used up unused allowance
from 2012 onwards ? iv) As my DC pot already exceeds £1m, do I incur a tax charge (other than what I mention in ii) above) on contributions, or is it only when I draw my benefits ? Thank you
Hi.
i) You can only apply for individual protection if your pension funds were worth more than £1.25 million as at 5 April 2014 as you will read here:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/347961/140821_published_standalone_v4.pdf
The lifetime limit will be £1 million with effect from 6 April 2016. Whether there will be an opportunity to protect that at some point in the future is not known.
ii) The annual allowance charge only applies if the sum of the annual allowance of £40,000 and the annual allowance for the three previous tax years is breached in a pension input period by the total of your own and your employer's contributions. The charge is not linked to the lifetime allowance. Take a look here for more information:
https://www.gov.uk/tax-on-your-private-pension/annual-allowance
http://www.hmrc.gov.uk/manuals/rpsmmanual/rpsm06108100.htm
iii) You can only use the unused annual allowance from the three previous tax years in addition to the annual allowance for the current tax year.
iv) The lifetime allowance charge only applies when you put your pension funds into drawdown, ie make them available to draw upon. Take a look here for more information, in particular the Mike and Judy examples:
http://www.hmrc.gov.uk/manuals/ptmanual/ptm081000.htm
I hope this helps but let me know if you have any further questions.
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