Proposed changes will increase complexity of GP pension planning
Posted On June 26, 2015 By mhauk
In his last Budget before the General Election, George Osborne announced a further change to the lifetime allowance (LTA) for pension savings; a reduction to £1m from 6 April 2016. This will be the eighth change in the lifetime limit since its introduction in 2006. Where the value of an individual’s pension savings exceed the lifetime limit tax is payable on the excess at the rate of 55% where the excess is taken as a lump sum.
For GP’s the value of their pension savings is calculated by multiplying their annual pension by a factor of 23. A GP in their mid 40s with a projected pension of say £43,500 will therefore have pension savings at the new lifetime limit. We expect pension protection arrangements for those GP’s affected by the reduce lifetime limit at 6 April 2016 in the form of Fixed Protection 2016 (FP16) and Individual Protection 2016 (IP16).
Other less well publicised changes affecting pension savings are those around the extent to which high earners will obtain tax relief on their annual pension contributions. Proposals have been muted that for those earning more than £150,000, the Annual Allowance, the amount of pension contributions which will attract tax relief, will be reduced from £40,000 to £10,000 depending on the level of earnings. The Annual Allowance will decrease by 50p for every £1 of earnings above £150,000 subject to a maximum reduction to £10,000.
With increasing complexity in this area, healthcare professionals need the very best of advice from their professional advisers.
If you wish to discuss this in more detail, or would like to know more about the services MHA members provide, please contact Hannah Farmborough on: 0207 429 4147. More information on NHS Pensions can be found on their website.