People drawing pensions
'fexibly' might be caught by new 'less flexible' rule on further pension saving
FOLLOWING an announcement in the Autumn
Statement, a consultation has been published on reducing the pensions
'money purchase annual allowance' from £10,000 to £4,000.
This means that those people who have drawn money from their pension pot will
not be able to put more than £4,000 a year back into a pension from April 2017
Robin Williamson, Technical Director of the Low Incomes Tax Reform Group, said:-
"We understand that the Government is keen to dissuade 'tax-free cash
recycling' which might mean that people seek to get further tax relief on money
they have just taken out of a pension.
But with pensions freedom, an individual might decide to take money out of their
pension (currently allowed at age 55) for example, to pay off their mortgage
or other debts. They might then decide to use their new found surplus in
disposable income to put money back into pensions to provide a nest egg for
their old age when they eventually decide to reduce their hours or stop working.
The money purchase annual allowance of ?10,000 is unlikely to catch out too many
people who might do this. But reducing it to £4,000; equating to savings of
£333 a month; is much more likely to cause problems for these people;
especially if thinking about it in terms of someone choosing to save money they
might have previously been paying on a mortgage."