TPAS Newsletter - February 2012
HMRC Reports Low Take-Up Of Fixed Protection
Money Marketing has reported that HM Revenue & Customs' officials are surprised over the low number of people who have applied to protect their pension fund following the government's decision to cut the lifetime allowance.
The lifetime allowance will be reduced from £1.8m to £1.5m from April 6 2012. Savers have until 5 April 2012 to apply for fixed protection to retain the £1.8m allowance for their fund. Failure to apply for fixed protection will result in savings above £1.5m being taxed at 55 per cent, potentially costing investors hundreds of thousands of pounds.
HMRC Launches Annual Allowance Calculator
The annual allowance is the annual limit for pension saving in order to qualify for tax relief.
In April 2011 HMR reduced the annual allowance from £255,000 to £50,000. But at the same time introduced 'carry forward', which allows savers to use previously unused annual allowances. So, although the annual allowance is currently £50,000, more could be saved if there are unused allowances from previous years.
HMRC has this month published an online calculator to help savers identify what their annual allowance is, utilising, if appropriate, carry forward.
Retired Police Officer Wins Injury Pension Ruling
Police authorities may have to find tens of millions of pounds extra to fund their pension liabilities after a retired inspector won a landmark legal challenge preserving his income. The ruling by a court in Leeds concerned the pensions of injured officers once they reach retirement age and resulted in lower payments.
One estimate suggested it could add £80m to police authorities' bills. A high proportion of police authorities had accepted the Home Office guidance.
The test case was brought by Edward Crudace, 67, who served with Northumbria police. He was seriously injured when arresting a prisoner and was forced to retire from the force. His injuries meant he could not work and he was awarded a substantial injury pension. When he reached the age of 65, however, it was cut by Northumbria police, relying on the Home Office guidance, leaving Mr Crudace with a severely reduced income.
David Lock QC of No5 Chambers, who represented Mr Crudace, argued that the Home Office guidance was unlawful because it led to police injury pensions routinely being reduced to the lowest level when former officers reached the age of 65.
In a high court ruling in Leeds, Judge Behrens reversed the cuts to Mr Crudace's pension and ruled that the Home Office guidance was unlawful because it was inconsistent with the statutory scheme under which the pensions were paid.
The judgment, he acknowledged, would enable other former police officers who had had their pensions reduced in a similar way to apply to police authorities for the decisions to be reversed and for their pensions to be restored.
Updated! Spotlight On...
We have re-launched our factsheets. There are now 19 in total.
- The new drawdown rules (SPOT001)
- The new flexible drawdown rules (SPOT002)
- The new drawdown rules for people already using drawdown (SPOT003)
- Changes to the annual allowance (SPOT004)
- Income drawdown v annuity purchase (SPOT005)
- Annual Allowance transitional rules (SPOT006)
- How to test pension savings against the annual allowance (SPOT007)
- Trivial commutation - detailed (SPOT008)
- Getting financial advice (SPOT009)
- Using a redundancy payment to pay into a pension scheme (SPOT010)
- The change from RPI to CPI (SPOT011)
- Trivial commutation - quick (SPOT012)
- Transfers with immediate vesting vs OMO (SPOT013)
- Death benefits - taking small pots as a lump sum (SPOT014)
- Paying voluntary NI contributions - the extended rules (SPOT015)
- Tax and lump sums paid on death - defined benefit schemes (SPOT016)
- Tax and lump sums paid on death - defined contribution schemes (SPOT017)
- Tax and lump sums paid on death - income drawdown plans (SPOT018)
- Fixed protection (SPOT019)
If you have any pension questions, please feel free to contact us by calling our helpline on 0845 601 2923, emailing email@example.com or writing to us at 11 Belgrave Road, London, SW1V 1RB.