Finance Bill Tracking Service 2010 | Budget 2010

BN34 PENSION SCHEMES: LAYING OF TREASURY ORDER TO SET THE LIFETIME ALLOWANCE AND ANNUAL ALLOWANCE

FROM 6 APRIL 2011

Who is likely to be affected?

1. Pension scheme members who take pension and lump sum benefits on or after 6 April 2011 valued at more than £1.8 million, and who do not have existing transitional protection.

2. Pension scheme members with contributions valued at more than £255,000 to a registered pension scheme on or after 6 April 2011.

General description of the measure

3. Tax-relieved saving in a registered pension scheme for an individual is subject to an overall limit called the lifetime allowance (LTA). The annual contributions limit on which tax relief can be claimed is called the annual allowance (AA).

4. As announced in the 2008 Pre-Budget Report, the 2010-11 LTA of £1.8 million and the AA of £255,000 will continue to apply, with their rates held constant, for a further five tax years, i.e. up to and including the tax year 2015-16.

5. A Treasury Order has been laid before Parliament today to put this into effect.

Operative date

6. The measure will have effect on and after 6 April 2011.

Current law and proposed revisions

7. The LTA and AA for tax years 2007-08 to 2010-11 are set out in a Treasury Order, SI 2007/494 (The Registered Pension Schemes (Standard Lifetime and Annual Allowances) Order 2007). The LTA was set at £1.5 million when it was introduced in April 2006, rising in stages to £1.8 million in 2010-11. The AA was set at £215,000 when it was introduced in April 2006, rising in stages to £255,000 in 2010-11.

8. A further Treasury Order has been laid before Parliament today to set the rate of the LTA at £1.8 million and the AA at £255,000 for the tax years 2011-12 to 2015-16 inclusive.

9. There are a number of limits set by reference to the LTA, for example the commutation limit for small amounts of pension rights. These limits will also remain constant from 2011-12 to 2015-16 inclusive.

Further advice

10. If you have any questions about this change, please contact Sue Marsh on 0115 974 3068 (email: pensions.policy@hmrc.gsi.gov.uk). Information about Budget measures is available on the HM Revenue & Customs website at www.hmrc.gov.uk