With the dust having now firmly settled on the recent changes that were introduced with effect from 6th April 2011, now seems an ideal time for a quick recap of the main changes in so far as they are likely to impact on “private clients”.
The changes were extensive and were brought in on the back of various consultations.
The annual pension allowance on which tax relief can be claimed has been reduced from £255,000 to £50,000,
The lifetime allowance has also been reduced from £1.8m to £1.5m with effect from next April. Unused allowances from up to the 3 previous years can be carried forward (for those that were actually members of registered schemes!),
Tax relief will be given at an individual’s marginal rate of tax – hence, relief at up to 50% will be available,
There is also some more flexibility on what can be drawn down, and on drawing down income at 75.
Whilst on the face of it these are massive reductions in the tax reliefs now available for pensions, they still offer good tax breaks for those with excess cash looking to invest efficiently and those with the ability to contribute into pensions should still be looking to utilise these reliefs – with relief available at up to 50%, and up to £200,000 of relief available (inc unused reliefs).
Clearly, for some, these reductions will have a big impact on what can now be invested and those individuals will no doubt need to consider alternative (or additional) strategies/vehicles through which to invest.
No doubt interesting times ahead…..