Towry's advice policy manager Andy James:
"For many, pensions are a great way of investing for retirement. However, whilst many employees are benefitting from having pension contributions made on their behalf, with auto-enrolment set to cover all companies with more than 1,000 employees by October 1st 2013, there are some who could be adversely affected by being caught up in the enrolment process. These will be individuals who have previously applied for the various forms of pension protection that had been available following changes in pension legislation and if they are auto-enrolled may then find that their pensions are subject to the new lower lifetime limit and consequently a tax charge.
"Individuals should make sure that any new contributions made are not likely to cause your total pension savings to exceed the new lower £1.25m lifetime allowance (which comes into effect at the start of the 2014-15 tax year), or at least if they do, that they are comfortable that the benefits from these new contributions outweigh the tax consequences.
"Don't forget also that the annual allowance will limit pension contributions to £40,000 each tax year from the start of the next tax year. For those who are already fully utilising the annual allowance, they need to ensure they take account of any likelihood that they will be auto-enrolled at some stage in the tax year and make sure that they do not over contribute. Tax relief will not be available on any payments made above the annual allowance and will be recouped either in the form of a tax charge following the completion of a tax return or, if the charge is in excess of £2,000, it can be paid from the pension scheme, and therefore reduce the overall benefits that will be received from the scheme.
"In any case, getting the right pension advice is going to be important."
|
