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Changes To HMRC Lifetime Pension Allowance

From 2012/2013 the HMRC will change to rules governing the lifetime pension allowance.

London, UK (Pryce Warner International) November 15th, 2011 – From next year the lifetime pension allowance will drop from £1.8m to £1.5m.

This means that the lifetime allowance of pension benefits holders are eligible to draw without tax implications will be £1.5m.

Anyone that holds any UK pension assets will be subject to this rule. It is possible for Expats to transfer their pension assets overseas, though depending on which scheme assets are transferred to, the HMRC will still make an assessment regarding an individuals lifetime allowance.

There is no limit to the amount of assets that an individual can build up under a registered pension scheme, however, once benefits have begun to be drawn and the amount drawn is more than £1.5m, tax charges will begin to apply.


However, from the 6th of April 2012 some individuals may be entitled to an allowance of £1.8m if they have fixed protection. This means that anyone who applied for enhanced protection before 5th April 2009 will still have an allowance of £1.8m.

Once the lifetime allowance has been used up, the tax rate that applies on remaining funds depends on how they are used. If an individual wishes for any amount of the remaining funds to be paid in a lump sum, the tax rate is 55%. This drops to 25% where the funds are retained within the scheme.

For example, if an individual wishes to receive a £200 000 lump sum from their pension scheme after the lifetime allowance has been used, they will pay a rate of 55% on that lump sum. In this example the individual would essentially receive £90 000.

David Harra, a Senior Market & Investment Analyst with Pryce Warner International, a Financial Services Provider for Expats, commented: “The lowering of the lifetime allowance will not affect that many people due to the size of the allowance, however, those affected may wish to consider ways in which they may be able to protect funds over the allowance value. Expats in such a position have a range of options available to do this. It may also be worth considering applying for enhanced protection rights now if you do not already have them and expect to have pensions rights over the £1.5m allowance. This is so that if the allowance is further reduced you will not be affected.”

Pryce Warner International Group provide International Asset & Investment Management, Independent Financial Advice & QROPS Overseas Pensions.

By: Aneil Fatania
Financial Editor
Pryce Warner International Group

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