The Lifetime Allowance 2015 is a limit on the amount of UK pension benefit that can be drawn from UK pension schemes without triggering an extra tax charge – whether lump sums or retirement income.
It is in an extremely complex area of advice and, unfortunately, due to QROPS not currently* coming under the lifetime allowance 2015 then it is mis-understood by non-qualified advisers who often “advise” on QROPS. (* I do emphasize ‘currently’ as HMRC are constantly reviewing it, look at both HMRC and YouGov Lifetime Allowance 2015 websites)
In essence it is possible for people taking in excess of the Lifetime Allowance 2015 to end up paying tax at 55%. However, the reality is very few people do.
Qualifying Recognised overseas pension schemes: QROPS and the Lifetime Allowance 2015
For sure, if someone transfers their pension from the UK into a QROPS and it is in excess of the Lifetime Allowance 2015 of currently £1,250,000 then they will instantly have to pay tax of 55% on the excess if accessed or 25% on everything over the Lifetime Allowance transferred with further income tax applied later. See our own specialist Lifetime Allowance 2015 website.
Yes, that is right, they will have to pay tax of up to 55% on the excess, not save tax of 55% as some websites purport to say.
So, the complete opposite of saving money then? Well, yes, except not in all circumstances and the lifetime allowance is reducing to £1,000,000.
Lifetime Allowance 2015 and UK pension funds worth less than £1,250,000
Well, as I wrote earlier, HMRC are constantly reviewing the eligibility of QROPS with regard to the Lifetime Allowance 2015 but it is fair to say that:
People with funds of less than £1,250,000 should consider their position prior to April 2016 as
- they may be able to utilise Lifetime Allowance Protection 2014 and Lifetime Allowance Protection 2016,
- as well as consider a QROPS as a last resort.
You can obtain more advice on all of this at our specialist Lifetime Allowance 2015 website.
The views expressed in this article are not to be construed as personal advice. You should contact a qualified and ideally regulated adviser in order to obtain up to date personal advice with regard to your own personal circumstances. If you do not then you are acting under your own authority and deemed “execution only”. The author does not except any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Where this article is dated then it is based on legislation as of the date. Legislation changes but articles are rarely updated, although sometimes a new article is written; so, please check for later articles or changes in legislation on official government websites, as this article should not be relied on in isolation.
This article was published in October 2015
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