Pensions tapered annual allowance

15 February 2016

Draft legislation has been published on changes to information requirements for pension scheme administrators following the introduction of the pensions tapered annual allowance from April 2016.

Draft legislation: the Registered Pension Scheme (provision of information) (amendment) Regulations 2016

HMRC has published draft regulations and a draft explanatory memorandum for a technical consultation. The draft regulations make changes to the information requirements for scheme administrators of a registered pension scheme in consequence of the introduction of a tapered reduction in the amount of the annual allowance for individuals with income of over £150,000 from 6 April 2016.

Background

It was announced in the Summer Budget 2015 that the government will restrict the benefits of pensions tax relief for those with incomes (including their own and employer’s pension contributions) above £150,000 by tapering away their Annual Allowance to a minimum of £10,000. The Annual Allowance, which is set at £40,000, is the limit on the amount of tax relieved pension saving that can be made by an individual or their employer each year. This policy will come into effect from April 2016. For every £2 of adjusted income over £150,000, an individual’s Annual Allowance will be reduced by £1, down to a minimum of £10,000.

To ensure this measure is focussed on the higher and additional rate tax payers who currently gain the most benefit from pensions tax relief, those with income (excluding pension contributions) below a £110,000 threshold will not be subject to a Tapered Annual Allowance.