The Financial Secretary to the Treasury (Mr Mark Hoban)
On 14 October the Government announced that from April 2011, the annual allowance (AA) for tax-privileged pension saving will be reduced from £255,000 to £50,000 and that from April 2012 the lifetime allowance (LTA) will be reduced from £1.8 million to £1.5 million. These changes will generate around £4 billion annual revenue in the steady state, protecting the public finances.
As a result of measures taken in the design of the new pensions tax regime, the Government believe that few individuals will incur tax charges from exceeding the AA. However, it recognises that in some exceptional cases, typically of long-serving individuals in defined benefit schemes, it is possible that large charges could occur. These charges reflect a significant uplift in pension value in a given year. The Government have today published a discussion document on options to meet high annual allowances charges. These include payment from pension benefits or by the pension scheme. This document is now available online on the Treasury website, and has been deposited in the House Library.
The Government intend to publish draft clauses on the chosen approach by February 2011.