Elaine Turtle: Happy New (Tax) Year

Before you think you are reading an old article, I am of course referring to the start of the new tax year. For advisers and their clients, the start of the new tax year sees a number of key changes, some positive and some not so positive. The changes range from increased tax-free personal allowances, changes to inheritance tax and the buy to let regime. For those in the SIPP sector, the most important areas are: Lifetime allowanceThe good news is that the pension lifetime allowance (LTA) for the 2019-20 tax year rises from £1.03m to £1.05m. This rise is linked to the consumer price index (CPI) but is still considerably lower than its high of £1.8m. The issue with the LTA is that it penalizes prudent saving, which seems at odds with what we believe Government and regulators are trying to achieve. The headline amount of £1.05m sounds like a huge pension pot, but it does in fact catch a lot of middle England – not just the wealthy, especially if they have made good investment decisions. This isn’t just about what a client pays in but also takes into account the investment performance, so it is the whole pot. Clients approaching retirement, 5 years or so before, really need to access good advice and work with their adviser to structure their retirement income to minimize any unnecessary tax charges. Annual allowanceThe annual allowance (AA) was introduced on A-day back in 2006 at £215k but that is now a distant memory as it is now just £40k a year. The good news is that at least it hasn't been reduced further, but more and more people are being caught by the taper relief limits and in some cases falling foul and receiving a tax charge. Carry forwardOne very useful financial planning tool is the ability to carry forward unused annual allowance from the previous three tax years. The current amount is £40k and interestingly this tax year will be the first that sees carry forward being based entirely on the £40k AA over 3 years, it was previously £50k. So as we reset the tax year and look to 2019-20, I still see that a SIPP will be a popular retirement planning choice. Many of the SIPPs this year will be new policies, where clients want the flexibility that a SIPP offers. Others will be those wanting to consolidate a number of their pension pots into one, making it more efficient and easier to run. It is often also cheaper for the individual and when coupled with the investment flexibility offered by a SIPP, the New Year still looks good for the sector.Elaine Turtle, Director, DP Pensions

Elaine Turtle: Happy New (Tax) Year

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