The restriction to the annual amount of £40,000 which can be paid into a pension scheme was introduced on 5 April 2016, and it is now starting to cause big issues with those in final salary schemes. These people do not pay specific monetary amounts into their pensions, instead their annual “contribution” is calculated based on the change in value of their scheme value as a result of changes to their salary, etc.
There is therefore a delay before they know whether they have exceeded the allowance, and there is nothing they can do at that point to avoid exceeding the limit (if that is in fact what has happened) with the result that they are hit with a tax charge for having made a “contribution” which is too large.
This is explained more fully in our update here. As explained in the update, this is having a particularly great effect on senior NHS staff, who are one of the largest group of higher paid employees with final salary schemes, to such an extent that it is starting to affect levels of service in the NHS.
This problem has been brought to the attention of the Secretary of State, Matt Hancock, and a “halfway house” concession has been suggested, but this will probably not be enough to solve the issue so there may well be more movement to come.
Author: Peter Hedgethorne, Director, Plus Accounting
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