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Breaching Pension Allowances

Personal pension contributions amounted to £31.3 billion in the financial
year 2019-20. That’s a rise of some 12% over the previous year
according to HMRC figures released in March 2022. The report also
shows the number of individuals contributing to pension schemes in
2019-20 stands at 9.4 million, a rise of some one million since the
introduction of auto-enrolment.

Whilst this is good news for future pension health, the report also
highlights the importance of ensuring that pension contributions
don’t exceed allowable limits. In the period reviewed, over forty
thousand taxpayers reported having exceeded the Annual Allowance to
the tune of £950 million.

Equally concerning, the pension Lifetime Allowance was reported as having
been exceeded by 8,510 individuals, resulting in additional tax
charges amounting to £342 million. That’s an increase of 21% on
the previous year. Further breaches may also come to light as
individuals’ tax positions are scrutinised.

Pension regulations can be complex which is why pension planning should not
only look at the current tax year but also consider contributions in
the light of existing pension arrangements. If you are looking for
advice on pensions, or if your situation has changed and you may
therefore need to review your existing pensions or investments,
contact Beckworth by using one of the links on our website.

Image: xlibber, CC BY 2.0 , via Wikimedia Commons