The summer 2015 Budget confirms that the lifetime allowance (LTA) will be reduced from £1.25m to £1m from 6 April 2016 (Lifetime allowance).
It will, however,increase by CPI with effect from 6 April 2018 (Lifetime allowance).
Individuals who are likely to be affected by the reduction in the LTA need to consider what action they should take. Those affected will include people who have not yet drawn pension benefits and whose benefit value is likely to be in excess of £1m (adjusted for CPI) on retirement. This could, of course, extend to people who have pension funds some way short of £1m at present but who have some years to retirement over which reasonable investment growth could be expected.
There are options to protect pension benefits but they come with limitations and are frequently complicated. Advice should be sought before committing to a specific solution so the potential downside can be understood.
People who are likely to have pension benefits with a value of in excess of £1m can consider making an election for LTA protection. The options here are complex and what suits one investor may not be the best solution for another.
For those considering retirement in the very near term, and where protection may not be appropriate, the individual could consider drawing some or all of their benefits in 2015/16 when these will be set against the current £1.25m LTA.
How the fund is accessed on retirement can also affect the way the LTA is calculated. For example, if a member has money purchase benefits, using their fund to purchase a scheme pension rather than a lifetime annuity may reduce the percentage of the lifetime allowance they have used up (Lifetime allowance).
It is important that you seek financial advice before making any decision regarding your pensions and the new LTA. If you would like to talk to one of our advisors in order to organise a free initial meeting, please contact us. We are an IFA firm based in Clifton, Bristol but we are happy to travel across the UK to meet with clients.
Financial Advice Bristol
If you would like to speak with one of our Independent Financial Advisors and potentially receive financial advice, please contact us on 0117 923 7652. We are based in Clifton, Bristol but we are happy to service clients from across the UK and we provide free initial meetings at our client’s convenience.
Churchill Wealth Management Limited is located at 13 Alma Vale Rd, Bristol BS8 2HL, United Kingdom.
About Us: Churchill Wealth Management is a team of independent financial advisors/financial advisers (IFAs) based in Clifton, Bristol. We provide independent financial advice, including pension advice, investment advice, inheritance tax planning and protection/insurance advice.