When George Osborne, the chancellor, announced the reduction in the lifetime allowance last year, he claimed just 4% of the wealthiest savers would be affected.
The lifetime allowance is effectively how much you can have in pension schemes without paying extra tax when you withdraw your benefits.
Last week this reduced from £1.25 million to £1.00 million and given that there are estimated to be 11.5 million people approaching retirement, some 460,000 people could be affected.
While a £1 million limit sounds a lot, a member of a final salary pension scheme with a pension of £45,000 per annum and tax free cash of £135,000 would exceed the limit.
If the excess over the limit is taken as cash the tax charge is 55% and if it is taken as income the tax charge is 25% but this is on top of your marginal tax rate.
This is a complex subject and planning ahead can be vital to ensure you maximise your pension at retirement.
We can deliver a workshop which addresses this issue for higher earners to explain the impact of the reduction and the planning options available.
Attending the workshop is a good first step to raise awareness and this can be followed up with individual advice if required.
