April 05, 2023
The United Kingdom has recently released a new pension policy that is intended to encourage inactive individuals (primarily those aged 50+) to return to work (the “Policy”).
The standard annual allowance (“AA”) is the maximum amount of pension contributions an individual can make each year with tax relief. This Policy increases the AA from £40,000 to £60,000, effective April 6, 2023.
Once an individual begins withdrawing from their pension, they may be subject to the money purchase annual allowance (“MPAA”), which reduces their AA. Likewise, the tapered annual allowance (“TAA”) is a reduction to the AA for high income earners. This Policy increases the MPAA and TAA from £4,000 to £10,000 and increases the adjusted income level for TAA from £240,000 to £260,000, effective April 6, 2023.
Similarly, pensions are also subject to the standard lifetime allowance (“LTA”), which is the maximum amount an individual can save in their pension over the course of their lifetime before being subject to tax. This Policy abolishes the LTA charge from April 2023 onwards.
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