Legal Focus Autumn 2015 – Pension Windfall

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29 October 2015


Hazlewoods200Amid news of tax rises and spending cuts delivered in the 8 July Budget was a potential windfall for anyone looking to top up their pension fund.

Since 6 April 2011, tax relievable pension savings have been subject to an annual contribution limit set at £50,000 initially, and then reduced to £40,000 from 6 April 2014.

However, in a fit of short term generosity, George Osborne announced that savers could potentially add £80,000 to their pension funds in the current tax year, with the full amount benefiting from tax relief at their marginal rates of tax.

This means that those who made their contributions early in the tax year (perhaps fearing the tax relief may be withdrawn, not increased) and thought they had used up their £40,000 allowance may now get another bite at the cherry.

This announcement coincided with the news that from 6 April 2016 the annual limit for pension savings will be reduced on a sliding scale, from £40,000 to £10,000 for those with income of more than £150,000.

The annual allowance will be reduced by £1 for every £2 of income in excess of £150,000, so those earning over £210,000 a year will have an allowance of just £10,000.

The ability to make greater contributions in the current tax year will be welcome news for those whose tax relief will soon be restricted.

As ever, the application of these new rules is not completely straightforward (so much for pensions simplification). The additional £40,000 allowance applies to the period 9 July 2015 to 5 April 2016 and can be affected by the level of contributions made prior to that.

Advice should therefore be sought before making further contributions to take advantage of the additional tax relief.



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We all know that nothing in life is certain. As the actor, director and philosopher Clint Eastwood once said: “If you want a guarantee, buy a toaster.” He also said he’d tried being reasonable and didn’t like it. They should teach this kind of philosophy in law school. One thing in life is reasonably certain though. If you’re a law firm worth your salt, at some point you will be approached by another entity (most probably a work introducer) with a whizzy idea to ‘partner’ with you to ‘help you accelerate your growth’. In commercial speak this means, ‘we’d like to keep feeding you work but we’d also like to share in your profits’. The arrangement may be pitched to you as a joint venture – a win-win no less.

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