Dear Brother/Sister,
On 26 August 2010 Circular 2010HOC0533MW was issued to members explaining Government proposals to change tax relief on pension contributions. These changes had the potential to affect a wide number of FBU members with significant tax implications for members contributing towards pensions schemes.
These changes reduced the Annual Allowance (AA) limit from £255,000 to £50,000 per year and the Lifetime Allowance (LTA) from £1.8 million to £1.5 million from 6 April 2011.
The circular explained that those most at risk would be:
(i) members with long service and/or significant promotional or high pay rises;
(ii) high-earners and members with enhanced or primary protection;
(iii) members retiring on ill health or redundancy grounds.
It also outlined that, although these are the groups of members who are most likely to be affected, there are certain circumstances where other factors may mean that a larger range of members may be liable to a tax charge.
To assist members the union produced a bulletin which explained AA and LTA and the potential impact of the changes using a series of examples.
In his 2012 Autumn Statement, the Chancellor announced a further reduction:
- to the AA limit to £40,000 a year,
- and the LTA to £1.25 million
to be implemented from the 2014-15 tax year onwards.
This will make it even easier for members to exceed the allowance and be hit by hefty tax charges.
To assist members with this issue the union has posted an updated document on the pension section of the FBU website that explains:
- what AA and LTA are,
- the changes that have been proposed,
- the safeguards available to prevent a member being liable to a tax charge,
- how AA is applied when a member stops accruing benefits,
- potential costs (this includes a series of worked examples),
- options for paying tax charges.
This note has been produced for the union by First Actuarial.
Yours fraternally
Matt Wrack
General Secretary
2013HOC0033MW
