Elaine Turtle: Why post age 75 Sipp planning is more complex

The end of the tax year is traditionally a really busy time for adviser and SIPP providers. This year was no exception and there was the usual rush of contributions and enquiries right up until the last minute. This is of course quite natural and we are all relieved that we have seen the back of one tax year and now start fresh with the 2018/19 one.For the past few years there have been many changes that have increased the workload around tax year end but these are now settling down and this makes it easier for advisers to guide their clients, it also makes it easier for SIPP providers as there are far less system changes that need to be made.The key considerations for SIPP clients include the annual allowance, which has not increased and is capped at £40,000 for this tax year. This is unless they have started to draw pension benefits from a flexi access drawdown fund (FAD) in which case the lower limit of £4,000 will apply. There is also the tapered annual allowance which came into force in April 2016 and applies to high earners. For every £2 of income above £150,000 each year, £1 of the annual allowance is lost. To ensure that everyone has some annual allowance, the maximum reduction is £30,000 so any client that earns over £210,000 a year will be eligible for an annual allowance of £10,000. The other key consideration for advisers planning for the 2018/19 tax year with their clients is the lifetime allowance (LTA) which finally increases this year. The LTA has increased from £1m to £1.03 m for the current tax year and it is likely to increase in line with inflation each tax year. The LTA is a complicated area for clients to understand, and advisers spend a lot of time explaining this area to them, especially in relation to reaching the age of 75 which is of course an important trigger. Freedom and choice may have been good for the pension sector, but it didn’t remove all of the quirks in the pension system. While once reaching the age of 75 had been the catalyst to purchase an annuity, or to take benefits from a pension scheme, it now triggers two specific areas for consideration by both an adviser and the client. The first is the tax treatment of death benefits post age 75 and the second being a further test of pension savings against the individuals remaining lifetime allowance (LTA).So, while we can all breathe a sigh of relief that we are through another tax year end, there is lots to focus on and much for advisers to talk to their clients about.Elaine Turtle, director, DP Pensions

Elaine Turtle: Why post age 75 Sipp planning is more complex

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