Pension & Tax Planning Issues

Some Planning Aspects Post April / December 2009

• April 2009 - Pensions
  • Change in pension rules for those with "relevant income" - NOT EARNINGS, in excess of £130,000 (reduced from £150,000 at December 2009) for this or any of the two preceding tax years.
  • In this situation, full tax relief restricted to the higher of
    • A basic annual allowance of £20,000
    • An enhanced allowance of £30,000, based on the lower of
      • The average employee contributions paid less frequently than quarterly averaged over 06/07,07/08 and 08/09
      • £30,000
    • Protected pension input based on contributions pre 22/4/09
  • Note if impacted by the above and this is re 08/09 (or 09/10) there may be action that can be taken to avoid this.
• October 2009 - ISA's - Allowance increased from £7,200 to £10,200 for those aged over 50
• April 2010 - Loss of personal allowance for those earnings  in excess of £100,000 (salary sacrifice should be considered)
• April 2010 - New tax rates for those with income in excess of £150,000, 50% income tax and 42.5% dividend tax rate
• April 2010 - ISA's - Allowance increased for everyone to £10,200
• April 2010 - Those with primary protection for pensions should seek advice, Lifetime Limit fixed of £1.8 million April 2010 to April 2016
• April 2011 - National Insurance contributions (employee and employer) increase by 1% - again this makes salary sacrifice attractive  (increased from 0.5% December 2009).
• April 2011 - new pension legislation for those with earnings in excess of £130,000
• April 2012 - Launch of Personal Accounts

Planning

• Those with earnings over £130,000 should maximise pension contributions
• Those with earnings under £130,000 should consider
  • Maximising pension contributions now in case levels are reduced
  • Consider establishing regular monthly contributions
• Those with earnings over £100,000 should consider salary sacrifice to retain the personal allowance from April 2010
• Employers should budget for the increase in national insurance contributions and the launch of personal accounts
• Seek advice