Significant consequences
MyCSP, the mutual public sector pension scheme administrator, advises that tens of thousands of public sector employees are likely to be affected by the reduction in the Lifetime Allowance.
Broadly a Lifetime Allowance of £1m is equivalent to an annual pension of £50,000, or a pension of £43,478 with tax free lump sum of £130,000. This means that people earning around £66,000 who retire after a full career could face a tax charge.
From April, 2016, the total amount that can be invested in a pension will reduce from £1.25m to £1 mn as announced in the recent Budget. From 2018-19, the Lifetime Allowance will be increased by inflation based on the Consumer Prices Index.
While the exact numbers can only be estimated, MyCSP believes that the number impacted across the public sector could be as high as 100,000.
For members who may be affected by the Lifetime Allowance changes, MyCSP is advising them to take advice and consider the advantages and disadvantages of applying for new protections which will be made available.
The transitional protection that will be provided in respect of the April 2016 reduction is expected to be similar to previous protection regimes. Broadly:
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