The Chancellor of the Exchequer, Rishi Sunak, made his first Budget Speech today in the House of Commons.
The main change for pensions is an alteration to the complex Annual Allowance Tapering Rules, which affects high earners including many senior NHS employees, effectively reducing the tax advantages of pension savings.
With effect from 6th April 2020, the tapering rules will remain in place, but the thresholds will each increase by £90,000 taking out 98% of NHS employess and 96% of the general population from the effects of this. There will however be a further reduction in the Minimum Tapered Annual Allowance at the upper end of earnings.
|2019/20 (current)||2020/21 (new)||Difference|
|Adjusted Net Income||£150,000||£240,000||+£90,000|
|Minimum Tapered Annual Allowance||£10,000||£4,000||-£6,000|
For anyone with Adjust Net Income between £150,000 and £300,000 the effect on the Annual Allowance is positive, compared to the current rules. If Adjusted Net Income exceeds £300,000 the new rules will result in a lower Tapered Annual Allowance in 2020/21.
Here are some examples based on the new rules, assuming Threshold Income is exceeded in all cases:
|Adjusted Net Income||Annual Allowance 2019/20*||Annual Allowance 2020/21*||Difference|
|Up to £150,000||£40,000||£40,000||Same|
|£312,000 and above||£10,000||£4,000||£6,000 worse|
*Annual Allowance shown takes into account tapering rules, where applicable. Note that tapering occurs at the rate of £1 for each £2 of income above the Adjusted Net Income Threshold. The maximum reduction in the Annual Allowance due to tapering is £30,000 in 2019/20 and £36,000 in 2020/21.
March 11th, 2020