MYSIPP News
Lifetime Allowance (LTA) changes effective 6th April 2012
Tuesday, 07th February 2012
Following the October 2010 Budget announcement Lifetime Allowance (LTA) is reducing
from £1.8 million to £1.5 million from 6th April 2012. LTA is the maximum capital amount
of tax-relievable pension savings that any one individual can accumulate in all pension arrangements.
Individuals who have pension savings greater than £1.5 million or who believe their pension fund
could rise above this threshold, even if the pension fund is not currently receiving contributions
or it is unlikely there will be any future pension contributions irrespective of current fund size,
should consider applying for ‘Fixed Protection’. This will provide you with a personalised lifetime
allowance of £1.8 million.
If you do not seek protection and you subsequently crystallise a pension fund of more than £1.5 million,
the excess will incur a tax charge of 55% if taken as a lump sum or 25% if taken as income which itself is
then taxable under PAYE rules. There is no guarantee that this £1.5 million limit will not be reduced in future legislation.
Up until 5th April 2012 it is possible to protect yourself with the £1.8 million LTA, rather than the reduced £1.5 million limit,
by completing the HMRC Fixed Protection form and sending it to HM Revenue & Customs, Pension Schemes Services, FitzRoy House,
Castle Meadow Road, Nottingham, NG2 1BD. We strongly recommend you send this by recorded delivery to HMRC by mid March at the latest
to ensure it gets there in time. Once processed HMRC will send you a certificate and we would ask that you send a copy to us.
Please be aware that if you apply for Fixed Protection the following conditions will apply:
- Contributions cannot be made after 6th April 2012 to any pension, money purchase or personal pension arrangements
- A new arrangement cannot be set up, unless it is solely for the purpose of transferring out of an existing arrangement
- There are concessions for current members of Final Salary Schemes, however the rules are complex and advice is strongly recommended
From October 2012 we will see further changes arising from the pension reform, specifically auto-enrolment, which could affect your
Fixed Protection. If you apply for Fixed Protection you will need to ensure that if you are auto-enrolled into any other pension scheme,
you opt out within 1 month. If you do not opt out within 1 month you will lose your Fixed Protection.
If you already have Primary or Enhanced Protection you will not be able to apply for Fixed Protection. However, you should not be affected by the
reduction in LTA because the standard LTA for this purpose will continue to be treated as £1.8 million.
If you are unsure whether the change in the LTA could affect you, or if you would more information, please contact us on 0800 458 7897.
MYSIPP Celebrates its 5th Anniversary
Tuesday, 18th October 2011
As MYSIPP looks forward to celebrating its 5th Anniversary on
1st November 2011 we would like to thank all our members and IFAs
for their support. We have had a remarkable 5 years and have achieved
industry recognition with Defaqto 5 Star rating for the past three years.
Our members recognise how important pension provision is today as the state
retirement age increases and the government is under pressure to meet the
needs of an ever-ageing population.
We have seen the Financial Industry go through many changes through some
very difficult economic times and MYSIPP has been quick to grow and adapt
in this ever changing environment. In particular, in the budget last year,
Flexible Drawdown (this is where income levels are unrestricted) was
introduced as an option for members to take maximum benefits from their SIPP.
This option is available to all members who have a guaranteed income of
£20,000 per annum. MYSIPP have included this as an option for its members
and has the appropriate facilities in place. We always recommend that you
seek independent financial advice when considering taking benefits from your SIPP.
At MYSIPP we have a simple charging structure, with one fee applicable to
all administration. There is no additional charge should you decide to use
Flexible Drawdown. If you are in a Portfolio SIPP, you can use Flexible Drawdown
without any SIPP Fees at all. We have updated our Key Features to reflect all of
the regulatory changes. This is available on our literature page for your information.
If you would like to know more about Flexible Drawdown or have any questions
about MYSIPP, please contact us on 0800 458 7897.