Who pays high earners’ charges?

As announced in October 2010 from April 2011 the annual allowance for tax relief on pension contributions will be reduced from £255 000 to £50 000.

The Treasury has announced how the facility for meeting high annual allowance charges from pension benefits will work in practice including that the tax should be paid at the point the charge arises.

Individuals with annual allowance charges above £2 000 will be able to elect for the full liability to be met from their pension benefit. Schemes will be required to operate this facility only where an individual has exceeded the annual allowance outright within that scheme in the relevant year.

For full details see the summary of responses document and draft clauses.

‘Setting the threshold above which schemes can be required to pay the tax as low as £2 000 may mean that...