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News - 14 December 2012

Pensions: how the Autumn Statement affects you.

This years Autumn Statement included three main changes to pensions covering the annual and lifetime allowances and the proposed increase to maximum income levels for pensioners with income drawdown arrangements.

Tonmoy Kumar, Manager of the Accounts Department of ABDS discusses what effect they may have:

“Those individuals who will be affected are:

  • Individuals making substantial contributions to personal pension schemes
  • Taxpayers with pension scheme pots over £1.25million
  • Individuals with pensions in drawdown 

So what are they?

Increase in the state pension
The basic state pension will be increased by £2.70 a week in April 2013.

ISAs
The annual investment allowed into an ISA will increase to £11,520 for 2013/14 (with the limit on the cash component remaining at 50%).
The government also intends to consult on expanding the categories of investments that may be included in a stocks and shares ISA to include shares traded on markets for Small and Medium Enterprises (SMEs) such as the Alternative Investment Market (AIM).

Drawdown pensions.
The amount of pension that may be taken from a drawdown scheme is currently limited to 100% of an equivalent annuity (as determined by the Government Actuary’s department). This limit will be increased to 120%
The date of the change has not yet been announced.

The lifetime allowance and annual allowance for pensions savings.

There is currently a lifetime allowance of £1.5 million on an individual’s pensions savings.

For defined contribution scheme ‘pension savings’ means the total of employer’s and employee’s contributions. For defined benefit schemes the calculation is more complex. From 2014/15 the limit will be reduced to £1.25 million, but there will be transitional arrangements to protect the position of individuals who are already at or near the £1.25 million limit.

Also from 2014/15, the annual allowance will be reduced from £50,000 to £40,000.


If you need any help and advice on Retirement Planning, Inheritance tax, capital gains Tax, in settling an estate, or any Tax or VAT matter, contact Lavinia Newman, Stuart Coleman or Tonmoy Kumar to discuss how ABDS can help.

ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900  E-mail: abds@netaccountants.net

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