More than 16,000 UK workers who contribute to registered pension schemes made contributions in excess of the £50,000 annual allowance threshold by using the carry-forward provisions, according to research by Kuber Ventures.
The research, which analysed data from HM Revenue and Customs (HMRC) for pension contributions in the 2011/12 tax year, showed that this represents an amount in excess of the new £40,000 limit to be introduced in April 2014 of £895 million.
The current £50,000 annual allowance limit was introduced in the 2011/12 tax year, coinciding with the ability to carry forward unused relief from up to three previous tax years. Many individuals will now have fully used their previous year’s carry-over option and therefore need to seek alternative tax-efficient savings options.
Dermot Campbell, managing partner of Kuber Ventures, said: “The annual allowance change is most likely to affect 40-to-60 year olds at the peak of their earning career who have surplus income now that their children have flown the nest or mortgages have been repaid.
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“This brief window is often the only period in a person’s life when they can make meaningful savings. Tax efficiency is imperative to ensure that these hard-earned savings are not eroded by current excessive tax rates.”
“In 2012, individuals who went over the annual allowance threshold did so to make use of the newly introduced carry-forward feature. Many of these people will now have fully exhausted this option and so will find themselves limited by the new threshold.”
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