This article was first published in the February 2011 UK edition of Accounting and Business magazine.
The pension changes planned for 6 April will mean a number of changes for individuals and businesses. The annual allowance by which an individual’s pension savings can increase without incurring a tax charge reduces to £50,000 from £255,000 for the 2011–12 tax year. Those with a pension income of at least £20,000 per annum will be able to draw down pension benefits. They will no longer have to buy an annuity when they reach 75.
There will be further changes during 2011 and 2012. For example, the automatic pension enrolment obligations will be phased in during 2012 and the lifetime allowance will reduce from £1.8m to £1.5m. The impact of the change in the lifetime allowance rates should be reviewed now, as there will be a form of protection called fixed protection available to individuals who expect that the amount of their pensions savings will be more than £1.5m when they come to take their benefits. Transitional rules will apply and individuals will need to apply to HMRC for fixed protection before April 2012.
Glenn Collins, head of advisory, ACCA UK