PENSIONS TAX RELIEF
Posted on 15/03/2011 by
Dear Colleague
Please find attached for your information a briefing note on the reduced Annual Allowance which will come into effect from 6 April 2011.
In October last year the Government announced its proposals for a new regime of restricting pensions tax relief which will apply to all members of all registered pension schemes, including the PPS 1987 and NPPS 2006.
The Annual Allowance is the maximum amount of pension savings an individual can have each year that receives tax relief. There is no limit on the amount that can be saved in a pension scheme, but there is a limit on the amount which receives tax relief each year.
Currently the Annual Allowance for 2010/11 is £255,000. It is straightforward to determine the level of contributions put into a defined contribution scheme over a given period and to assess that against the Annual Allowance. However, it is more complicated for defined benefit schemes such as the PPS and NPPS. The current method for calculating the amount of pension saving for a defined benefit scheme is to multiply the increase in the value of the pension by a flat factor of 10.
However, it is proposed that the Annual Allowance for 2011/12 will reduce to £50,000 and be fixed at this level until at least 2015/16. In addition, the defined benefit flat factor will increase to 16.
The provisions will be finalised when the Finance Act 2011 receives Royal Assent and they will come into force on 6 April 2011.
The briefing note contains further details about the proposed changes to the Annual Allowance and includes illustrative examples, which I hope will be of assistance.
You will appreciate that this is a very busy time and I would be grateful if JBB Chairs or Secretaries only would contact the Research Department with queries on the Annual Allowance. Please do not direct individual members or federation representatives to the Research Department.
Regards
Ian Rennie
General Secretary
Police Federation of E&W
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