Maximising the favourable tax breaks afforded to pensions is clearly a good idea. But for high net worth individuals it is important to understand the annual contribution and pension fund limits.
As of 6th April 2016 the annual contribution allowance remains at £40,000 although utilising unused relief still remains available. The Lifetime Allowance has reduced from £1.25m to £1m. At the time you take benefits any excess over the Lifetime Allowance will be taxed at 55% if drawn as a lump sum or 25% if withdrawn as an income, known as the Lifetime Allowance charge.
In the past there have been ways of protecting your pension savings from the reductions in the Lifetime Allowance and it's subsequent charge. This latest reduction is no different, with Fixed Protection 2016 and Individual Protection 2016, protecting your pension savings up to £1.25m and will be available in the near future.
This is a particularly complex area. Your PSFM consultant can provide this specialist advice.
What to consider when making your first plans for retirement
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