Independent Financial Advisors - IFA Bolton, UK

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Protecting Your Pension

Pension savers who have already bust the £1.65 million pension threshold or are concerned about doing so are strongly recommended to seek professional advice on how to shield their savings from the lifetime allowance charge, or alternatively how to maximise tax breaks under the current rules.

It is possible to register your pension fund value built up before 6th April 2006 to protect it against the lifetime allowance charge and pension savers have until April 2009 to do this, although the sooner you understand your options the better you can plan accordingly.

The first thing you may want to consider if you are at or near the lifetime limit is getting a valuation of your entire pension savings, before considering putting certain protective measures in place, which will harbour the fund from the lifetime allowance charge.

Our advisers are well-placed to guide you through this rather complicated area, but generally speaking, there are two levels of protection available.

So-called ‘primary protection’ is available where the value of pension funds was over the £1.5 million lifetime limit on A-Day.

Going for primary protection will shield the value of your pension you have already built up and can potentially allow it to continue to grow in line with the increases in the lifetime limit without triggering the lifetime allowance tax charge.

‘Enhanced protection’ is available to any fund regardless of its size. Roughly speaking, this shelters not just the current value of pension savings, but also the full value of future investment returns without incurring a tax penalty. However, this option is only available where no further contributions have been made or will be made in the future, or if you are in a final salary scheme, that your benefits have not and will not in the future increase above certain limits and no new benefits are built up in respect of your employment after A-Day.

Most experts agree that ensuring you have a plan in place to protect your savings because of the impacts of pension simplification is an area where you will almost certainly need advice and struggle to do-it-yourself. Anyone with a pension pot worth more than £1 million will almost certainly need guidance.
 
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