Pensions changes – a detailed explanation

Posted by PM | on Mon, 14/12/2009 - 09:00 4738 7 comments

The changes to the pensions tax legislation announced on Wednesday 9 December were far from transparent, and because announcements concerning both the anti forestalling legislation and the new (as yet unpublished) rules were announced together this presented a challenge to assimilate what was planned. So, teasing out the threads, here is what we have :

Anti-forestalling measures in FA 2009 Sch 35 (Technical note)

Continued...

Employer contributions

Anonymous | Mon, 14/12/2009 - 23:09 | Permalink

So for the director / shareholder of a company who is a HR tax payer and his company has been making pension contributions for a number of years in respect of him averaging say £35k. He makes no contributions personally.

His salary / benefits are c. £160k.

Will he face a SAC on the company contribution in excess of £30k? Or is the company contrbution only taken account of in the relevent income calculation?

Typo?

nogammonsinanun... | Tue, 15/12/2009 - 09:14 | Permalink

Should the reference to 09 December 2010 read 09 December 2009 as the effective date from which the income limit drops from £150K to £130K?

With kind regards

Clint Westwood

Answers

RebeccaBenneyworth | Tue, 15/12/2009 - 14:30 | Permalink

For the first question - if his relevant income is £160,000 ignoring the company contributions then he is caught by the legislation as originally implemented i.e. from 22 April 2009. If the normal annual company contributions are £35,000 then a SAAC will apply on £5,000 as his limit will be £30,000 based on the regular annual contributions. If the company had paid in monthly then there is no SAAC as the level of regular contributions has not increase. The company contribution does not get added to income under the FA 2009 rules, only under the new rules which will commence in 2011. So the effect of the company contribution is restricted to those employees who have income in excess of £130,000 (new lower limit introduced wef 9 December 2009).

Thanks Clint, I've got so many years swimming round in my poor head I missed one!

But if the income is over £130k

Anonymous | Tue, 15/12/2009 - 16:11 | Permalink

for 2009/10 and 2010/11 is it the case that the employer's contributions would only be taken into account in calculating the total pension input, so that there could be a charge in respect of the employee's own contributions but not the employer's until 2011? So in other words the company can still make contributions up to the annual allowance assuming it can be justified as for the purposes of the trade, without triggering a charge for the current and following year?

Relevant income?

Anonymous | Tue, 22/12/2009 - 10:30 | Permalink

I think that your definition is ambiguous, there is no deduction for gift aid or employee pension contributions.

confused

Anonymous | Thu, 21/01/2010 - 18:18 | Permalink

So the income test of £150,000 will include employer contributions as part of the income computation.

If so why does the legisltion not bite in the example " Salary £120,000 company pension contribution £150,000. The new legislation does not bite as the income is less than £130,000. No tax charge arises on the pension contribution".

Ignore Confused

Anonymous | Thu, 21/01/2010 - 23:50 | Permalink

I should have read the original post correctly.