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No doubt this thought has passed George Foreman’s mind on many occasions over the years, following his famous defeat at the Rumble In The Jungle, back in 1974. Since then, he’s retired on numerous occasions, until 2004, when he finally hung up his gloves at the age of 55, and as we know, has since become a household name, in the kitchen of all places!
After such a long and varied career, we’re sure that he’ll have no worries about his pension pot, but the rest of us probably still need to keep a careful eye on our pension savings for the future. For those with sizeable pension funds building up, the Government is introducing some important changes to the Lifetime Allowance (LTA) on 6 April 2014, which could mean action is required. The LTA is a cap placed on the value of a pension fund, and anything greater than the LTA on retirement could be taxed at an eye-watering 55% if a lump sum is taken, or 25% on a regular pension – these charges are in addition to any income tax that might be due on pension ‘income’ actually drawn.
The LTA will reduce from £1.5m to £1.25m from 6 April 2014. However, Fixed Protection 2014 can be applied for prior to this, which will cap your LTA at £1.5m going forward. This will however prevent any further contributions being paid after the application is made. Individual Protection 2014 will also be available from August 2014 for those whose pension fund is worth at least £1.25m on 5 April 2014, replacing the fixed LTA of £1.5m with your pension fund value on that date, and will allow you to continue to make future contributions. In both cases, should the value of your pension fund at retirement exceed your LTA, the tax charges outlined above will apply.
Both forms of protection can be applied for only if earlier rounds of protection offered by HMRC haven’t been taken up, and both offer scope for pension planning opportunities. Bear in mind that pension providers/banks may have a notice period, if changes to regular pension contributions are required pre and post 5 April 2014.
So, if your pension pot is nearing £1.5m, and you don’t want to be in for a ‘grilling’ when retirement day comes, speak to your pension advisor. If you’d like any more information on the changes to the LTA, please get in touch with your usual Springfords contact who will be happy to provide further details.
This is a general guide which is intended to give background information and is not a substitute for taking specific advice based on your particular circumstances.