Fiducia Wealth Management
Posted in Pensions & Retirement, Tax Planning on 27.11.09

You may have read of the proposed changes regarding pension contributions that have the aim of reducing the tax relief available on these to the basic rate of relief. The intent is that such provisions will come into effect from April 2011 and apply to persons earning more than £150,000 a year. This caused a potential issue insofar as concerns were raised that such higher earners might pour money into their pension plans over the next couple of years to take advantage of the higher rate tax relief before it is removed. This led to the introduction of the Special Annual Allowance (often referred to as anti-forestalling provisions).

These provisions apply to those making pension contributions and who have had earnings of over £150,000 in either the current tax year or one or both of the past two tax years. For such persons the following applies;

– if they are already making regular contributions (i.e. quarterly or more frequently), then they can continue to make these without any problems. This is known as the protected pension input amount.

– if they are making irregular contributions (which include contributions made regularly but less frequently than quarterly), then the maximum contribution can be made depends on what contributions have been made in the past.

  • If the average of contributions over the tax years 2006/07, 2007/08 and 2008/09 is less than £20,000, then a maximum contribution of £20,000 can be made.


  • If the average of contributions over the periods mentioned above exceed £20,000, then the maximum contribution is the lesser of; the average of contributions made in the tax years 2006/07, 2007/08 and 2008/09; or £30,000; or the earnings in the tax year of the contribution

So, for example, if you fall into the definition of a high earner and have been making annual contributions of, say, £50,000 for the previous three tax years, then you would only be able to make a contribution to your pension of £30,000.

If your average annual contributions came to £28,000, then you would still be able to make that level of contribution. However, if your earnings are less than those amounts, but you have contributing more than £20,000 to your pension in past years then you will be restricted to your earnings level.

For someone who has not made contributions over the past three years the £20,000 limit would apply (subject to your earnings in the current year being sufficient).

Under this regime, you could have two clients, making identical contributions, who would be affected in different ways. For example;

– Client A earns over £150,000 and makes monthly contributions of £5,000 to his personal pension. Under the rules he will be able to continue to do so with no problem.

– Client B earns over £150,000 and makes annual contributions of £60,000 to his personal pension. Under the new rules he will be restricted to a £30,000 contribution.

This is a complex subject to deal with, and we have only briefly skimmed the surface here, so if you are in this position and require guidance as to exactly how this impacts on the level of pension contribution you can make, please do not hesitate to contact us at the Dedham offices.


If you would like to know more about how we as Financial Advisers can help you  with your Pensions and overall Retirement Planning then visit the Retirement Planning section of  our website: Retirement Planning  or send us email at: [email protected]

The information contained in our website is for guidance only and does not constitute advice which should be sought before taking any action. The information is based on our understanding of legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change. Accordingly, no responsibility can be assumed by Fiducia Wealth Management Limited, or any associated companies or persons, its officers or its employees, for any loss occurred in connection with the content hereof and any such action. Professional financial advice is recommended for every case.

Fiducia is a multi award-winning firm of Financial Advisers based in Dedham near Colchester situated in the heart of Constable Country on the Essex Suffolk border.

Fiducia Wealth Management Ltd. Dedham Hall Business Centre, Brook Street, Dedham, Colchester, Essex, CO7 6AD.

Fiducia Wealth Management Ltd. is authorised and regulated by the Financial Conduct Authority.. FCA No. 408210

Fiducia Wealth Management
Posted in Pensions & Retirement, Tax Planning on 27.11.09