Given the recent pension tax changes announced in this month’s Budget and the short timeframe until they are likely reversed under a Labour government, many managers and their clients are urgently looking at the best ways to take advantage of this short window of opportunity.
The window of opportunity is open
By effectively removing the lifetime allowance, the government has provided a window of opportunity for individuals whose total pension value would otherwise have been excessive and subject to the lifetime allowance tax charge. These people need to act pretty quickly as we may have a change of government in the next 18 months and the Labour Party has already said it will reverse Jeremy Hunt’s pension changes, replacing it instead with narrower solution that only benefits NHS staff. Over the next 18 months, people with very high value pension funds need to consider whether they should crystalise their entitlement and avoiding a possible return to the limits and tax charges that Labour may re-instate.
Implications of a reversal
Labour has said that it will reverse the Budget pension tax changes. This creates uncertainty and the potential for further complication. It also means that we only know with any degree of certainty what the rules will be until the next general election in less than two years’ time. It is difficult to see how the lifetime allowance would be reinstated without huge complexity, and it seems more likely that there would be a reduction in the annual allowance or in the rate of tax relief available for higher earners.
Act now
Anyone in a position to take advantage of the changes should be gearing up and seeking advice now. We still await the finer details, but this may well be an 18-month window of opportunity. At this important phase of the year, where we move from one tax year to the next, we expect many individuals and companies will need help and advice as soon as possible. Pensions will be back on the table for many who have limited their saving in recent years.
|
