Warning as you could be ‘caught out’ by 55% pension tax
Millions of pension savers will be diligently putting money aside for their future retirement. Many will be hoping for a positive outcome, with the more they save providing them with higher security in later life.
However, pension savers could essentially be punished for saving “too much”, if they trigger an allowance.
The Lifetime Allowance limits how much a person can save into their pension without being subject to a hefty tax charge.
It is currently set at £1,073,100, but exceeding this amount could see Britons slammed with a 55 percent tax charge.
Express.co.uk spoke to Andrew Tully, technical director at Canada Life, who shed more light on the matter.
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“There is also a significant mismatch between how defined benefit and defined contribution schemes are treated for LTA purposes.
“It would be far simpler to just simply ditch the Lifetime Allowance for defined contribution schemes.
“Instead, there could be reliance on the annual allowance restricting the input.
“But unfortunately, any changes are unlikely to happen. The Government has raised over £1.6billion in taxes from this allowance since it was first introduced, and this is going to rapidly increase over the next few years.”
An HM Treasury spokesperson previously told Express.co.uk: “The lifetime allowance was frozen to ensure the sustainability of the public finances and the current threshold means savers can put over £1 million into their pension completely tax-free.
“Over nine out of 10 people approaching retirement have a pension pot worth less than the lifetime allowance, so will not face a tax charge.”
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