Reductions in pensions taxation limits from April this year mean that more senior firefighters retiring after 5 April or receiving a promotion could breach the Lifetime or Annual Allowance for tax efficient pensions savings, experts MyCSP have warned.
MyCSP, the government’s first mutual joint venture and administrator of the civil service pension scheme, has issued the warning ahead of changes to the Lifetime Allowance, which will be active from 6 April 2014.
The changes will see the threshold for the Lifetime Allowance – which is the maximum amount of pension savings that benefits from tax relief over a person’s lifetime – reduce from £1.5 million to £1.25 million. The limit on the tax efficient pensions savings that can be made in any one year, the Annual Allowance, will also reduce from £50,000 to £40,000.
Firefighters could breach the new annual allowance if they have more than 20 years’ service. The changes don’t just affect the highest earners; an Area Manager receiving a promotion could breach the annual allowance if he or she has more than 20 years’ service.
Deputy and Assistant Chief Fire Officers retiring on full pension from April 2014 could breach the Lifetime Allowance for the first time when it reduces.
MyCSP is advising the Fire and Rescue Service to support firefighters through the changes so that they are aware of how they might be affected, the options available to them and the action they need to take.
Firefighters should consider their intended retirement date, the amount of lump sum they plan to take and their likely increase in pay. Crucially, members need to consider whether to apply to for fixed protection to protect the current Lifetime Allowance of £1.5m before 5 April 2014.
To help employers communicate the changes, MyCSP has launched a new service that helps explain to senior roles the impact of the changes. The service incorporates seminars, projections for individuals showing the potential impact of the changes in various scenarios and one to one sessions with senior staff.
Virginia Burke, business development director, MyCSP, said: “It is important that scheme members are aware of the upcoming changes in order to make informed choices about their options and ensure the correct HMRC reporting procedures are followed.”
For more information on MyCSP visit: www.mycsp.co.uk