Bhargaw Buddhdev, Partner at Barnett Waddingham, said; “This is welcome news, particularly if it extends to the lifetime allowances and annual allowances. This will give individuals and the pensions industry a period of stability after constant erosion of the allowances over recent years.
“One area we hope the government will revisit is the Scheme Pays option. This will allow individuals to elect for some or all of their annual allowance tax charge to be paid from their pension savings. For the higher paid impacted by the tapering of the annual allowance, the current legislative provisions mean that “mandatory” Scheme Pays apply only to tax charge on savings in excess of the standard annual allowance of £40,000, not the lower tapered annual allowance.
“This means affected individuals cannot require the scheme to pay the whole of their annual allowance tax charge if it is in excess of £2,000. At present, those with earnings plus value of pension savings in excess of £210,000 are required to pay the first £13,500 of the annual allowance tax charge themselves, unless the pension scheme is willing to offer “voluntary” Scheme Pays to meet the whole of the tax charge.
“A change by the Government to allow individuals, whose annual allowance is tapered, to meet the whole of their tax charge - if it is in excess of £2,000 - to be met by a deduction from future pension benefits, rather from current income, would be welcome.”
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