The current annual allowance for tax relief on pension contributions stands at £50,000 however this will be reduced to £40,000 in the next tax year. Any contributions in excess of this figure will be subject to the annual allowance charge. Depending on personal circumstances, any unused annual allowance can be carried forward for up to three years and it’s important to contact your adviser to determine the best course of action for your circumstances.
With the lifetime allowance being reduced from £1.5m to £1.25m in effect as of 6th April 2014, any pensions taken above this limit will incur significant tax charges at retirement unless appropriate protection is put in place. Fixed protection which would fix an individual’s lifetime allowance at £1.5m must be claimed for by 5th April 2014. Individual protection, which must also be applied for by 5th April 2014, offers the option for a personal lifetime allowance for individuals with pension savings in excess of £1.25m. Opting for individual protection means an individual will have a personalised lifetime allowance equal to the value of their pension savings on 5th April 2014.