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The Actuary The magazine of the Institute & Faculty of Actuaries

Pension tax charges avoidable if action taken before April 2012

Anyone who wants to can apply to retain the current £1.8m allowance after April 201, but this comes at the price of ceasing contributions. Drawing benefits early may also be a possibility and enable tax to be saved.

Graham Cooke, senior consultant and business development manager, JLT, explained: "To assist those who are considering how their benefits might be impacted by the revised Lifetime Allowance and to provide guidance on protecting benefits, JLT Wealth Management has launched the ‘Lifetime Allowance Protection Audit'. The audit will undertake a complete valuation of benefits and consider what actions might be taken to mitigate the tax burden.

"Many of those with large pension pots will struggle to calculate the actual values which are needed to determine whether additional tax charges are likely to apply. For many, additional tax can be avoided by taking action but there's not much time left - our new service will undertake a full valuation and provide pension forecasts on which key decisions can be taken."

Mr Cooke continued: "Building up pension benefits that potentially exceed the Lifetime Allowance does not make much sense. The ‘recovery tax' payable on the excess is currently 55% which is higher than the maximum rate of income tax."