How will annual allowance charges affect me this year?

27th May 2021 by Liz Densley, Honey Barrett

How will annual allowance charges affect me this year?

My colleague Tori Ferguson has written a series of detailed blogs about pension charge taxation – but will the charge affect you?

Going forward restrictions of allowances (or annual allowance tapering) will only apply to GP locums and salaried GPs with total income over £200k. So, charges are perhaps less likely than they used to be for many individuals.

That being said, and tapering aside, it is easier than you might think to exceed the ‘standard’ £40k annual allowance limit:

  • We’ve seen GPs caught out where parents have been contributing to a personal pension for their child without considering the interaction or knock-on effect where that child is also a member of the NHS pension scheme too.
  • Paying for added years, additional pension, additional voluntary contributions (AVC) (freestanding or otherwise) or payments into a SIPP or personal pension (as mentioned above) can also increase pension input/growth, to the extent that the annual allowance is exceeded – particularly when taken in conjunction with ‘normal’ NHS Pension membership.
  • For older GPs with ‘flexi-access draw-down’ pensions, there may be an interaction between a very heavily reduced ‘money purchase annual allowance’ and the ‘alternative annual allowance’ for those still accruing NHS pension benefits.

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