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.
“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.”