According to the latest data obtained from HM Revenue and Customs, tens of millions of pounds have been paid by people exceeding their lifetime allowance, which is the maximum amount they can save in their pension.
Looking at the previous year’s figures, £20m was paid in additional tax on pensions in 2014-2015, however looking at figures from HMRC 2015-16, the additional tax taken has risen by £16 million. This is after the Lifetime Allowance was cut.
The Lifetime Allowance was introduced in 2006 at £1.5 million, and in 2010 it reached a level of £1.8 million. Due to several pension reforms, the Lifetime Allowance has now been reduced to £1 million.
What this might mean for you is, if your pension fund exceeds £1m, you might face an extra tax charge of up to 55pc.
Your pension fund is assessed when you decide to take money from your pension early or when you turn 75 years old. If your pension is over the limit, then you could be handed a tax bill.
Looking back over the past 5 years, the tax generated from exceeding the lifetime allowance has tripled from £12m, due to the limit being continuously cut.
If you’re worried that this might affect your pension fund, here’s where KLO Financial Services can help! Talk to our financial advice team – call 01926 492406 or email firstname.lastname@example.org to make an appointment.