Transitional protection for pre-A-Day claims on tax free lump sums
There are three types of tax free payment sum rights that can be given transitional protection.
Where an affiliate has elected for primary protection, any Non-Taxable money entitlement (up to 25 % of fund worth) will be protected. The member's tax-free money sum entitlement is worked out as at 6 April 2006 and this amount
into the annuity 6 weeks after the contribution was made. Higher rate taxpayers will be in a position to reclaim a further 20 percent and additional rate taxpayers 30 percent on some or The majority of the contribution through self-assessment. The extra 20/30 per cent is given by extending the point at which the individual will start to pay higher/extra rate tax by the quantity of the gross contribution.
An employer can also make contributions to an employee's own annuity, subject to the yearly allowance.
Other third parties may send payments for the individual who's got the stakeholder or private pension plan. Third-party payments will count toward the plan holder's contribution limits, and tax breaks will be given at the rate relevant to the owner of the plan. This suggests that a raised rate taxpayer making a contribution for a basic rate taxpayer (or non-taxpayer) won't receive higher rate tax relief.
The first protection allows clients to basically remain members of pension schemes subject to a percentage factor over and above the lifetime allowance. In this scenario, if an individual continued active membership of an annuity scheme, i.e. By continuing to contribute or accrue benefits in a project, then this is amongst the only circumstances when the correct solution to your query will pension lump sums be taxed and the answer could most likely be yes.
Listening to advice regarding this very complex area of allowance planning is essential.
About the Author:
Early Pension and Early Retirement are key issues looked at by My UK Pension Plan, an online service which connects individuals with Financial Advisers
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