Lifetime allowances

As well as putting a cap on your contributions the Government has put a limit on the amount that you can have invested in a pension plan at the time that you take the benefits. They called the permitted amount the Lifetime Allowance.

This limit is being reduced from the 6th April 2012 to £1,500,000. Current and previous Lifetime Allowance limits have been:

2008/09 £1,650,000

2009/10 £1,750,000

2010/11 £1,800,000

2011/12 £1,800,000

2012/13 £1,500,000

If the value of your funds exceed these limits when benefits are taken then substantial tax charges will apply to the excess. This is 55% if the excess benefits are taken as a lump sum or 25% if taken as income. The income will then be subject to income tax at the member's highest rate.

Protection for Lifetime Allowance

Any pension fund that exceeds the relevant Lifetime Allowance at the time that benefits are taken (known as Crystallisation) will be subject to the Lifetime Allowance charge. Individuals who have continued to build pension rights in the expectation of a Lifetime Allowance of at least £1.8 million and have not registered for Primary or Enhanced Protection (both no longer available) will be able to apply for what is known as Fixed Protection. Although the relevant form is not yet available from HM Revenue & Customs they have confirmed that application for this protection can be made up to 5 April 2012.

Protection of Tax-Free Cash

For plans that are based on Occupational Scheme rules it is possible that the tax-free cash is above the normal amount, which is 25% of the value of the plan. This is again related to values at 6th April 06 (A Day) and if higher tax-free cash applied at that time it is possible to protect this so that the higher amount can be taken in the future.

Complicated? Yes. If in doubt contact us to ascertain your position.

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Financial Advisers

Jonathan Walker
Jonathan is the director and joint owner of the Pension Drawdown Company.

Robert Bolton
Robert is a practising Barrister and is also fully qualified as a Diplomaed Financial Adviser.

Bob Diamond
Bob is a Pension Specialist who has been with the company since its incorporation in 1996. Bob has been a financial adviser since 1989.

Andrew Ross
Andrew is a qualified financial adviser and is undertaking further training to become fully diplomaed.

Roger Easterbrook
Roger is a financial adviser with a background in Executive Search and is close to completing the Diploma.

Click here for more team members.

Market Monitor

Updated: 6th February 2012

Signs of an improvement in the US economy and an absence of bad news from Europe helped global equities stage their strongest weekly rally in several months. A surge in hiring in the US economy drove the Nasdaq index to an 11-year high on Friday, as optimism grew that the jobs market is on a steady path to recovery. Technology stocks gained a further boost as Facebook 's long-awaited IPO filing drove a two-day rally in internet names. The US dollar rose against the euro, the pound and the yen as investors speculated that the positive signal on the US economy would lessen the chance of a further round of quantitative easing.

European stocks closed at their highest in more than six months, while the FTSE 100 closed at its highest since last August. For the second week in a row, government bonds rallied as talks continued over the eurozone debt crisis with private creditors to Greece coming closer to an agreement on the country's debt. However, the week's news wasn't all positive, as Portuguese government bond yields surged to much the same levels that forced Greece to ask the EU for a second bail-out last year.

Important information: This update is intended to be for information purposes only.

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