WHAT IS A SSAS? - Bespoke pension schemes

Last chance (pension) saloon

22nd Feb 2016

Michael Galway, Director at Mattioli Woods, looks at how pensions tax relief will change for ‘high earners’ from 6th April 2016.

The pensions landscape has changed dramatically over the past couple of years. Many of these changes have been hugely beneficial – including the new “pension freedoms” and the improved tax position on death (whereby any undrawn pension assets – including commercial property and land – can now be passed onto any beneficiary, potentially without any tax implications whatsoever).

However, this year does bring one negative change – at least for ‘high earners’ – as from 6th April 2016, there will be a tapering of tax relief on pension contributions paid by those earning more than £150,000 pa. For those affected, the Annual Allowance (the limit on ‘tax relievable’ pension contributions) will be reduced on a sliding scale from the standard level of £40,000 to £10,000 pa. Broadly speaking, for every £2 of income an individual has over £150,000 there will be a £1 reduction in the Annual Allowance, down to a minimum of £10,000 for those earning £210,000 or more. The definition of income includes the value of any pension contributions paid on the members’ behalf, so it will not be possible to avoid the tapered Annual Allowance by reducing income via salary sacrifice. The good news, however, is that the facility to carry forward any unused Annual Allowance from the previous 3 tax years will continue – so there is a window of opportunity now for anyone affected by the new rules to make use of any unused Annual Allowance at the higher rates available in the tax years ending 5 April 2013 (£50,000), 2014 (£40,000) and 2015 (£40,000), before they expire.

Next months Budget from the Chancellor is expected to bring further changes for pensions tax relief, so this could well be a last opportunity for ‘high earners’ to take advantage of the more generous pension allowances currently available.

All of this assumes that the rules of your pension fund are flexible enough to enable the assets to be passed onto the next (and subsequent) generations. For more information on how a SSAS can provide this additional flexibility, please contact Mattioli Woods on 02890376970 or email ssas@mattioliwoods.com