The final budget of this Parliament was delivered by the Chancellor of the Exchequer on the 18th of March 2015. The only change targeted at pensions involved the Lifetime Allowance (LTA). The LTA will decrease from £1.25 million to £1 million from the 6th of April 2016. The Government will also index the LTA from 2018 in line with the Consumer Prices Index. This change will affect only the wealthiest pension savers, as only 4% of individuals currently approaching retirement have a pension pot worth more than £1 million.
Lowering of the threshold means more individuals will be affected in the future. To ensure the change is not retrospective, the Chancellor announced that transitional protection for pension rights already over £1 million will be introduced alongside the reduction.
The Annual Allowance for Defined Benefit schemes such as the Teachers’ Pension Scheme will remain at £40,000, but could reduced by £10,000 in a tax year if a member accesses the new pension flexibilities on or after the 6th of April 2015 and contributes £10,000 or more to a Defined Contribution scheme.
HMRC also confirmed that the new career average scheme has to be registered as a separate scheme in its own right. This means Teachers’ Pensions members who had previously applied and received Enhanced Protection, Fixed Protection 2012 and Fixed Protection 2014 could lose their protection if they join the new scheme and begin paying pension contributions.
If you think you may be affected by these changes, Teachers’ Pensions are recommending that you seek the advice of an independent financial adviser.