{"id":26035,"date":"2017-02-08T09:10:11","date_gmt":"2017-02-08T09:10:11","guid":{"rendered":"https:\/\/www.wingatebs.com\/reminder-about-pension-contribution-limits-for-high-earners\/"},"modified":"2017-02-08T09:10:11","modified_gmt":"2017-02-08T09:10:11","slug":"reminder-about-pension-contribution-limits-for-high-earners","status":"publish","type":"post","link":"https:\/\/www.wingatebs.com\/reminder-about-pension-contribution-limits-for-high-earners\/","title":{"rendered":"Reminder: Pension Contribution limits for &#8216;High Earners&#8217;"},"content":{"rendered":"<p>You may be aware that from 6<sup>th<\/sup> April 2016 there were changes made to pensions that will affect higher earners.<\/p>\n<p>Contributions made <span style=\"text-decoration: underline;\">this tax year<\/span>\u00a0are\u00a0restricted to as little as \u00a310,000 for those with \u00a3210,000 of earnings. However, because of how the rules work, they can affect those with income as low as \u00a3110,000 from <strong>all sources. <\/strong>As such if for example you are\u00a0providing an employer pension contribution of 5% for such an employee, they could very well have a problem but this would also be the case if the contributions were on a matched 3% of salary basis.<\/p>\n<p><strong><em>Whats changed?<\/em><\/strong><\/p>\n<p>From 6<sup>th<\/sup> April 2016 the Annual Allowance (the amount that can be contributed to a pension and receive tax relief) reduced for higher earners. Very simply, these individual&#8217;s\u00a0Annual Allowance has reduced by \u00a31 for every \u00a32 of income they have above \u00a3150,000.\u00a0 Some examples are shown below:<\/p>\n<ul>\n<li>Income of less than \u00a3150,000 their Annual Allowance is \u00a340,000<\/li>\n<li>Income of \u00a3170,000 their Annual Allowance is \u00a330,000<\/li>\n<li>Income of \u00a3190,000 their Annual Allowance is \u00a320,000<\/li>\n<li>Income of \u00a3210,000 or more their Annual Allowance is \u00a310,000<\/li>\n<\/ul>\n<p>The income is from <strong>all sources<\/strong> and will be adjusted if your employer makes large pension contributions.<\/p>\n<p><strong><em>Income over \u00a3110,000?<\/em><\/strong><\/p>\n<p>Whilst the rules may first appear\u00a0to affect only those earning over \u00a3150,000 they can affect those who have income as low as \u00a3110,000 <strong>from all sources. <\/strong><\/p>\n<p>This is because\u00a0individuals will\u00a0have a lower annual allowance for this tax year if both the following apply:<\/p>\n<ul>\n<li>their\u2018threshold income\u2019 is over \u00a3110,000 &#8211; this is their income excluding any pension contributions (unless they\u2019re paid as a salary sacrifice by your employer)<\/li>\n<li>their \u2018adjusted income\u2019 is over \u00a3150,000 &#8211; <strong>this is their income added to any pension contributions they make out of gross pay or their employer makes<\/strong><\/li>\n<\/ul>\n<p>The salary sacrifice must have been in place <strong>before<\/strong> 9th July 2015, and there are some other quirks of the rules beyond the scope of this communication.<\/p>\n<p>Therefore if an individual has income from all sources of less than \u00a3110,000 they are not affected by these changes.<\/p>\n<p><em><strong>Carry forward<\/strong>\u00a0 <\/em><\/p>\n<p>If individuals have unused pension Annual Allowance in the previous 3 tax years\u00a0then <strong><span style=\"text-decoration: underline;\">potentially,<\/span> <\/strong>for a limited period of time, carry forward may be an option to enable contributions in excess of the new April 2016 allowance limits to be made without a tax liability arising. <span style=\"text-decoration: underline;\">However<\/span>, even if carry forward is available it will\u00a0only ever have\u00a0very limited availability.<\/p>\n<p><strong>Action Point<\/strong><\/p>\n<p>We recommend employers review the pension contribution situation\u00a0for employees earning \u00a3110,000\u00a0or more and certainly for those earning over\u00a0\u00a3150,000. Depending on the individual employee&#8217;s circumstances your employer pension contribution could see the employee receiving\u00a0an unexpected tax bill, which would at best question the value of\u00a0them having a\u00a0company\u00a0pension contribution (as opposed to additional salary or another form of employee benefit).<\/p>\n<p>If you would like assistance in this area please contact your usual Wingate contact or one of our strategic benefit consultants on 01883 332260 or at info@wingatebs.com.<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>This information is based on our current understanding of legislation which can change without notice.\u00a0 Professional advice should always be sought prior to making any changes to your arrangements or deciding on any action in this respect. This information should <strong>NOT<\/strong> be treated as personal advice or recommendation.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>You may be aware that from 6th April 2016 there were changes made to pensions that will affect higher earners. Contributions made this tax year\u00a0are\u00a0restricted to as little as \u00a310,000 for those with \u00a3210,000 of earnings. However, because of how the rules work, they can affect those with income as low as \u00a3110,000 from all [&hellip;]<\/p>\n","protected":false},"author":15,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[26],"tags":[51],"acf":[],"_links":{"self":[{"href":"https:\/\/www.wingatebs.com\/wp-json\/wp\/v2\/posts\/26035"}],"collection":[{"href":"https:\/\/www.wingatebs.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.wingatebs.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.wingatebs.com\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/www.wingatebs.com\/wp-json\/wp\/v2\/comments?post=26035"}],"version-history":[{"count":0,"href":"https:\/\/www.wingatebs.com\/wp-json\/wp\/v2\/posts\/26035\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.wingatebs.com\/wp-json\/wp\/v2\/media?parent=26035"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.wingatebs.com\/wp-json\/wp\/v2\/categories?post=26035"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.wingatebs.com\/wp-json\/wp\/v2\/tags?post=26035"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}