Vodafone pensions

Q&As

Lifetime allowance

WHAT IS THE LIFETIME ALLOWANCE?

The lifetime allowance is the maximum amount of pension and/or lump sum that you can get from all your pension schemes that benefit from tax relief during your working life. There is no limit on the amount of benefits that your pension scheme can pay you. However, if your pension scheme gives you benefits of more than your lifetime allowance, you will pay an extra tax charge on the amount over your lifetime allowance. This tax charge is called the lifetime allowance charge.

HOW MUCH IS THE LIFETIME ALLOWANCE?

The standard Lifetime Allowance is £1.03m. Most people will not be affected by the lifetime allowance.

HOW WILL I KNOW IF I AM AFFECTED BY THE LIFETIME ALLOWANCE?

Most people will not be affected because their benefits will be less than the lifetime allowance. To find out the current value of your pension savings, you should contact your pension scheme administrator. This is Willis Towers Watson for the pension savings you have built up in the Vodafone pension arrangements.

Example

Xavier is a member of a final salary pension scheme. At 5 April 2018, Xavier is 55 and has built up a pension of £30,000. Xavier plans to retire at age 60. Based on his current level of pensionable pay, Xavier will have built up a pension of £40,000 when he plans to retire. To see if his benefits will be more than the lifetime allowance, Xavier will need to multiply his pension entitlement by a factor of 20 to get a 'capital value' to compare to the lifetime allowance.

On 5 April 2018, Xavier's benefits are valued as £30,000 x 20 = £600,000

At Xavier's planned retirement date his benefits would be worth £40,000 x 20 = £800,000

So his benefits at retirement will be less than the lifetime allowance of £1.03 million.

IS THERE PROTECTION FOR PENSION SAVINGS FOLLOWING THE LIFETIME ALLOWANCE REDUCTION FROM £1.25M TO £1M IN APRIL 2016?

Yes – you can apply for protection from the effects of the reduction in the lifetime allowance if you believe it will affect you. There are two types of protection:

Fixed protection 2016

This allows pension scheme members to apply to keep a lifetime allowance of £1.25m.

If you have enhanced or primary protection, fixed protection 2012 or 2014, or individual protection 2014, you cannot apply for fixed protection 2016.

Individual protection 2016

  • It will give you a lifetime allowance equal to the value of your pension on 5 April 2016 – up to an overall maximum of £1.25 million.
  • You will not lose individual protection 2016 by making further pension savings.
  • Any pension savings in excess of your lifetime allowance will be subject to a lifetime allowance charge.

If the value of your pension savings as at 5 April 2016 were more than £1m you will be able to apply for individual protection online. If you already hold fixed protection 2016, you may also be able to apply for individual protection 2016 too.

If you have primary protection, you cannot apply for individual protection 2016.

WHERE CAN I FIND MORE INFORMATION?

You can find out more about the annual allowance on the HMRC website at www.gov.uk/tax-on-your-private-pension/lifetime-allowance