Historically, only wealthy earners were affected by the lifetime allowance. If you take a £25,000 Uncrystallised Funds Pension Lump Sum (UFPLS) withdrawal, only £25,000 will be tested against your lifetime allowance or 2.32% of the standard lifetime allowance. These considerations will be different for different people, which is why independent financial advice is so important.". Fixed Protection 2016 fixes your lifetime allowance at £1.25m, but you lose this protection if you make or have made any pension contributions after 5 April 2016, and your allowance falls back to £1m. For instance, if you wanted to take £100, £25 would be free of tax and you would only pay income tax at your marginal rate on the remaining £75. If your pension is nearing the lifetime allowance you could divert money you would have contributed to your pension to other investment and saving products, such as an individual savings account (Isa). You can still apply if you already have previous protection, ie: enhanced protection The value of the total amount you are accessing, not just the lump sum or income amount that is paid to you. It’s important to understand exactly how and when the test is applied, and what is included. You can apply for protection via the HM Revenue & Customs website.Individual Protection 2016 is for investors who had savings of at least £1m in April 2016. You could probably only take out £30,000 to £40,000 a year.". If you are married, your spouse also has a lifetime allowance, so it may be worth putting money into their pension rather than your own. However, the way your pensions are valued depends on the type of scheme you’re a member of. Prior to investing into a fund, please read the relevant key information document which contains important information about the fund. In simple terms, if you are in a final salary (defined benefit) scheme, you multiply the expected gross pension entitlement by 20 if it’s a private sector scheme or by 23 if it’s a public sector scheme and then add on the projected value of any personal pension or occupational money purchase benefits including additional voluntary contributions (AVCs). You can currently put up to £20,000 a year into these. ‘I’ve been taxed on redundancy pay despite it being under the £30k limit. The best way to keep track of whether you might exceed the lifetime allowance is to regularly review the value of your pensions. You should regularly review your investment objectives and choices and, if you are unsure whether an investment is suitable for you, you should contact an authorised financial adviser. However you can’t apply for this protection if you made any contributions after the 5th April 2016. This test is applied every time you access your pension. That’s because the pension lifetime allowance limits the total amount you can build up for retirement, while retaining full tax benefits. If you go over the allowance you will generally pay a tax charge on the excess when you take a lump sum or income from your pension pot, transfer overseas or reach age 75 with unused pension benefits. In this case, your beneficiaries can choose how they wish to draw the pension money. The reason the public sector scheme multiple is higher is that these schemes provide tax free cash on top, equal to three times the pension, whereas in private sector schemes the tax free cash entitlement is obtained by commuting off part of the pension. You should find this information in your annual pension statement. You can put as much as you want in our investment accounts – with the same low costs and great choice as our Stocks and Shares ISA and SIPP. In the current tax year, you and your spouse can each make pension contributions of up to either £40,000 or what your earnings are – whichever is lower. "Defined-contribution scheme employer contributions are likely to be lower so it could be more sensible to look at other tax-efficient wrappers.". You usually have a one-month window to opt out of this and get your contribution refunded. Please remember that past performance is not necessarily a guide to future performance, the performance of investments is not guaranteed, and the value of your investments can go down as well as up, so you may get back less than you invest. Multiply this by the lifetime allowance at 5 April 2016. When a test is conducted at 75, the value of any untouched pensions or pensions previously moved into drawdown is included in this test. lifetime allowance protection schemesWhen the government cut the lifetime allowance from £1.25m to £1m in 2016 it also introduced schemes to protect some investors' allowances, known as Individual Protection 2016 and Fixed Protection 2016. If you don’t qualify for protection it may make sense to stop accruing benefits. Individual protection 2016 – If your funds were over £1,000,000 at 5 April 2016, you could reapply for individual protection 2016. You can apply for protection via the HM Revenue & Customs website. You usually have a one-month window to opt out of this and get your contribution refunded. Your pension value is tested automatically when you reach 75, to see if it exceeds the lifetime allowance.

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