More complicated pension rules

Last month we highlighted the restricted annual pension allowance for those with high income, such as doctors, which is resulting in large pension charges for a number of our clients.

It is possible, provided that certain conditions are met, to ask the pension scheme to pay the pension tax charge.  The criteria for this include:-

1. The pension tax charge is in excess of £2,000 and
2. Notice is given within the prescribed time limit

If the pension scheme pays this will reduce the taxpayer’s pension fund accordingly, but will avoid them having to find the funds to meet a potentially large additional tax bill.

Note that the deadline for doctors requesting that the additional tax be paid out of their pension funds for 2017/18 is 31 July 2019 and the deadline for 2018/19 is 31 July 2020. The deadline for other schemes may vary and should be checked carefully if you wish your scheme to pay.

There is a further complication for those individuals who have started drawing income from certain money purchase pension schemes. A new £4,000 limit introduced from 6 April 2017 restricts the amount that they can save in their pension and receive tax relief. Our concern is that many taxpayers may unwittingly trigger a tax charge due to this rule change.

Doctors lobbying for pension tax changes

Pension tax charges and ‘Scheme Pays’