Pension holders are being urged to seek advice on their pensions as radical changes to tax allowance are set to take effect.
Reductions to the threshold available for relieved annual allowance and lifetime allowance for pensionswill take place from the 6th April 2014, and are anticipated to impact over 300,000 UK pension savers.
The annual allowance for pension tax savings will be reduced from £50,000 to £40,000 in the coming weeks, with any sum over the new £40,000 limit liable to taxation at the rate of 40 per cent.
The standard lifetime allowance, which is the maximum amount of pension a person can save that benefits from tax relief, will also reduce from £1.5 million to £1.2 million. The tax over the lifetime allowance is 55 per cent for a lump sum amount and 25 per cent on a taxable pension.
HMRC estimates that around 30,000 people will be directly affected by the lifetime tax allowance cut with an anticipated 360,000 people expected to exceed the new lower limit over a long term.
South Wales chartered certified accountants Morgan Hemp & Company are now urging pension holders to seek advice on pension schemes and tax allowance before the changes take place.
Speaking of the changes, taxation expert at Morgan, Hemp & Company, Martin Hudson said “The pension tax allowance changes are set to take place in just two months time and we are advising people to seek advice and find out if, and how, they will be affected.
“There are ways to protect your pension savings but action must be taken sooner rather than later. Fixed protection is available for individuals that will fall under the newly reduced lifetime allowance.
“These measures will ensure that your lifetime allowance rate remains at the £1.5 million level but with setconditions that you stop pension saving and accruing benefits to your salary or defined pension scheme above a percentage determined by HMRC.
“However each pension, the value and the individual are different so we would urge pension holders to seek expert advice on pension tax allowance to ensure that your hard-earned pension savings are safeguarded before it is too late.”