HM Revenue & Customs have collected around £325m and £185M in annual allowance and lifetime charges respectively for the 2017-18 tax year according to Hargreaves Lansdown. Ordinarily, the pension contribution allowance is £40,000 each year tax-free, however, this is reduced to ultimately to £10,000 for those with incomes of £110,000 or more. The lifetime allowance currently is £1.055M
Greater awareness needs to be placed on the contribution that you and your employer both make because pension charges kick in as soon as you are over the threshold and it would be too late to rectify once the tax year has ended. Therefore, we urge you to plan your pension contribution from a tax perspective for the years going forward and ensure you are aware of the relevant contributions ideally at the beginning of the year. Although carrying out a review now would be sensible.
As mentioned, there has also been a spike in the number of people breaching their lifetime allowance. Therefore, individuals with pensions funds which are likely to exceed the lifetime allowance by the time they retire should consider a review of their pension arrangements and contributions.
It may be advisable therefore to review both your pension contributions and value of your pensions to ensure you do not suffer any unexpected pension charges.