Lifetime Allowance For Pension Savings Reducing To £1m From April 2016

Transitional protection will be available. It is proposed that the Lifetime Allowance will increase by inflation from 2018-19 onwards.

What Is The Life Time Allowance?

The Lifetime Allowance is the maximum amount of pension savings that you can make tax-free over your lifetime. This is currently £1.25million. The Government has announced that the Lifetime Allowance will reduce to £1m from 6th April 2016.

Am I Affected?

In order to check whether you are likely to be affected by the Lifetime Allowance you need to find out the values of your pensions and therefore how much of your Lifetime Allowance that you have already used up.

Remember this is not just your NHS Pension Scheme, you need to add up all of your pension savings including AVCs and Private Pensions. The value of your AVCs and Private Pensions is relatively straightforward and can be obtained by contacting your existing pension providers.

For your NHS Pension Scheme, the calculation depends on how much your NHS Pension will pay you per year when you retire. This amount, multiplied by 20, plus the amount of any lump sum is the amount that will count towards your Lifetime Allowance.

Therefore, if you receive a pension of £30,000 per year plus a lump sum of £90,000, this would have a value of 20 x £30,000 plus £90,000 = £690,000.

What Can I Do If I Am Affected?

For those doctors who think they might be affected by the reduction in the Lifetime Allowance, the Government has announced that transitional protection will be available.

Where this protection applies, any pension savings you have on the 5th April 2016 up to the value of the current Lifetime Allowance of £1.25m, will be protected from the Lifetime Allowance charge.

If you are a doctor who already has transitional protection previously, then as long as you continue to hold this, you will not be affected by the reduction in the Lifetime Allowance to £1m.

What Happens Next?

The transitional protection available from 2016 is likely to be the same as previous protection regimes. Therefore the protection available will be broadly:

- A protection that will protect the value of pension savings at 6th April 2016 but future contributions and investments will be taxed at 55%

- A protection that will protect existing savings at 6th April 2016 and any future investment growth up to £1.25m, but further contributions will not be allowed

















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