Senior Police Officers to face higher tax bills due to pension tax changes
Wednesday, 26 February, 2014
Reductions in pensions taxation limits from April this year mean that more senior police officers retiring after 5 April or receiving a promotion could breach the Lifetime or Annual Allowance for tax efficient pensions savings.
From 6 April 2014, the Lifetime Allowance (LTA), which is the maximum amount of pension savings that benefits from tax relief over a person’s lifetime, will reduce from £1.5m to £1.25m. The limit on the tax efficient pensions savings that can be made in any one year, the Annual Allowance, will also reduce from £50,000 to £40,000.
Chief Superintendents and higher ranks could breach the new annual allowance if they have more than 20 years’ service. The changes don’t just affect the higher earners; a police Sergeant being promoted to Inspector could breach the annual allowance if he or she has over 20 years’ service
Assistant chief constables retiring on full pension from April 2014 will breach the lifetime allowance for the first time when it reduces from £1.5m to £1.25m.
The warning comes from MyCSP, UK central government’s first mutual joint venture and administrator of the civil service pension scheme.
MyCSP is advising police forces to support officers through the changes so that they are aware of how they might be affected, the options available to them and the action they need to take. Offices should consider their intended retirement date, the amount of lump sum they plan to take and their likely increase in pay. Crucially, members need to consider whether to apply to for fixed protection to protect the current lifetime allowance of £1.5m before 5 April 2014.
To help employers communicate the changes, MyCSP has launched a new service that helps explain to senior officers the impact of the changes. The service incorporates seminars, projections for individuals showing the potential impact of the changes in various scenarios and one to one sessions with senior staff.
Virginia Burke, business development director, MyCSP; “It is important that scheme members are aware of the upcoming changes in order to make informed choices about their options and ensure the correct HMRC reporting procedures are followed.”
