There are only 8 working days left before your ‘annual allowance’ for 2012/13 is lost and with it goes the opportunity to maximise your pension contributions.
Annual allowance is the amount you can save into your pension every year and on which you can receive tax relief.
The rules allow you to ‘carry forward’ your allowance from the previous three tax years so you can make a higher pension contribution than the standard annual allowance of £40,000. However, the full allowance for the current year must be used in full first. Any unused allowance will be taken from the earliest year in which the allowance was not used up.
The 5th April 2016 is the last day to carry forward the unused pension allowances from the 2012/2013 tax year. After this date, the unused allowance (of up to £50,000) for that tax year will be lost for ever.
To qualify for this relief, you must have been a member of a registered pension scheme in the tax year from which the unused annual allowance is carried forward; however there is no requirement for you to have paid any contributions or had benefit accrual during those years.
Remember that any personal contributions need to be within 100% of your relevant UK earnings for tax relief purposes in the actual year the contribution is paid.
If you have an income from a flexi access money purchase pension scheme, you will now be subject to a reduced annual allowance of £10,000 per annum and the rules on ‘carry forward’ do not apply to your situation.
Continued changes to pensions have meant that the rules are complex, so to maximise your pension or ISA savings before the end of the tax year, please contact your Cullen consultant without delay.