If your pension savings are worth more than £1 million you may need to protect your pension savings from the lifetime allowance tax charge.
What is the lifetime allowance?
The lifetime allowance is the amount of savings you can take from your pension schemes without facing a tax charge.
The lifetime allowance is currently £1.25 million but is reducing to £1 million from 6 April 2016.
From 6 April 2016 if you take more than £1 million from your combined pension savings, you may face a tax charge.
How much is the lifetime allowance tax charge?
The lifetime allowance tax charge is
Do you know the value of your combined pension funds?
The lifetime allowance applies to the value of your combined UK registered pension schemes and some overseas schemes. Your pension scheme administrator(s) may already send you information that will help you to find out the value of your combined pension savings. If not you should contact your pension scheme administrator(s) for more information.
This information will help you if you need to apply to protect your pension savings from the lifetime allowance tax charge.
Do I need to do anything now?
If you are agreeing salary and pension contribution levels with your employer for next year, increases in contributions to your pension schemes based on higher earnings may mean you exceed the lifetime allowance.
You may need to act to protect yourself from a tax charge even if you are not yet nearing retirement.
If you have existing protection but know that you may lose this you may also need to consider whether to apply for the new protections.
What do I need to do to protect my pension savings?
From April 2016 you will be able to apply to HMRC for one of two new protections when the lifetime allowance is reduced. These will be known as fixed protection 2016 and individual protection 2016.
You will be able to apply for these new protections by using a new on-line self-service system which will be available from July 2016. The new self-service system is still being developed and we will provide you with more information on this in due course.
You can find more information about the reduction of the lifetime allowance in Pension Schemes Newsletters 72 and 73.
Your pension savings may already be protected
The lifetime allowance was introduced in 2006 and was reduced in 2012 and again in 2014.
Each time the lifetime allowance reduced, people who had already planned their pension savings on the basis of the higher lifetime allowance could protect their pension savings by applying to HMRC and should have received a certificate to confirm their protection.
However you may still be subject to the lifetime allowance charge if you lose this protection.
You can still apply for protection from the 2014 reduction in lifetime allowance until 5 April 2017. You can find more information about how to do this along with other information about the existing protections and when these may be lost at Tax on your private pension contributions – GOV.UK .Posted in Firefighters Pension | Comments Off on Lifetime allowance and Protection changes April 2016
1. STATE PENSION REFORMS 2016 / THE END OF ‘CONTRACTING OUT’
Cessation of “contracting out” of the Additional State Pension
You may be aware that from 6 April 2016 a new ‘single-tier’ State pension will be introduced. This will replace the existing Basic State Pension and Additional State Pension.
What does this mean for members of the Firefighters Pension Schemes?
Under the existing arrangements, members of the Firefighters pension schemes are contracted-out of the Additional State Pension and in return pay lower National Insurance contributions. The changes mean that from 6 April 2016, the firefighters pension schemes will no longer be contracted-out of the Additional State Pension.
These changes will not affect your accrued benefits in the firefighter pension schemes, or the benefits you build up in the future.
What does this mean for my state pension?
Further information about the new State Pension, including changes to National Insurance arrangements for members of public sector schemes like the firefighters pension schemes, can be found at the links below.
2. FIREFIGHTERS PENSION SCHEME (CARE) 2015 – FPS 2015 – PLEASE SEE SEPARATE TAB TO LEFT
3. COMMUTATION – Pensions Ombudsman Milne V GAD
The Pensions Ombudsman has published his determination in a case concerning the lump sum paid to a firefighter on his retirement. The case will have relevance to many firefighters and police officers who retired in the early 2000s.
Please note that it is still early days and the outcome of this recommendation is still under review. We are expecting to receive more information on this over the next 6 months and when we do we will then contact any members that maybe effected.
The bulletin explaining this and implications in more detail can be found here
6th August 2015
Determination in Milne v GAD Q&A
The Government appreciates that it will take time to process the necessary calculations, particularly given that some administrators will need to assess hundreds of cases and in the light of other demands. Clearly, however, there is a need to ensure that those individuals affected by the principles of this case, receive redress as soon as possible. The Government therefore expects that administrators will have completed the majority of calculations by December 2015 and will have made the majority of payments by April 2016.
On Monday 16th November, all pensions administrators received a letter from the Department of Communities and Local Government (CLG) confirming the following:
‘Following careful consideration of the issue of the discharge notice, the Government has decided that, given the particular circumstances of this case, the use of discharge notices is not required in relation to these payments. Therefore, payments can now be made to the individuals affected in line with the guidance provided by GAD. I would like to thank you for your patience whilst we considered a complex set of issues that have unfortunately taken longer than expected to resolve.’
Therefore, Peninsula Pensions will shortly be advising both individuals, and the Finance Team at Service Headquarters, of the amount of payment due. The majority of payments will be made on around Friday 4th December 2015.
4. MODIFIED RETAINED SCHEME (RDS SETTLEMENT)
NB: The period to make your decision with regards to joining this scheme, (where eligible), ends on 31st March 2015
5. FPS 1992 AND NFPS 2006
LEGISLATION CHANGES: Statutory Instruments 2013:
Posted in Firefighters Pension | Comments Off on Latest News/Legislation changes for Firefighter Pension Schemes