At Medical and Dental Financial Planning Service, we specialise in financial planning for professional occupations, and have many clients working in the University and College sector. 

Pension provision in the UK’s universities is overseen by the Universities Superannuation Scheme

Members will know that the benefits and rights under the scheme are currently under review, with Universities UK (UUK) negotiating with the University and College Union (UCU). 

The impact of reduced allowances

Over the past few years, the LifeTime Allowance has been reduced, and now sits at £1,030,000, with the Annual Allowance.

The LTA is the limit placed on the amount of pension benefit that can be drawn from pension schemes, whether lump sums or retirement income. Exceeding it will trigger a tax charge at the relevant date.

The Annual Allowance is the total pension contribution that can be made in a given tax year, including your own contributions and those made by your employer. Exceeding it will trigger a tax charge in your next tax return.

The changes to these allowance mean many more existing members of the Universities Superannuation Scheme may be at risk of further tax charges. It is therefore essential to ascertain whether you need to protect your pension.

One option for LTA, if your personal circumstances allow, is to apply for Individual Protection 2016 (IP16): if on the 5th April 2016 your pension benefits were valued above £1 million, then you can protect your pension at the value on that date.

If applicable, this means your LTA becomes personalised (PLA).

For example, if your pension benefits on the 05th April 2016 were valued at £1.2 million, then that becomes your PLA. You would only have a tax liability on the excess of your pension savings above your protected amount, (rather than the excess you’ve saved above the lower LTA, which applies if you do not have IP16 or any other previous forms of LTA protection in place.)

You should bear in mind that the LTA will increase by inflation (CPI) each year.

We can advise on which route you should take in terms of securing protection. Our bespoke system allows us to project forward using Lifetime Cash Flow Modelling, consider different scenarios and strategies you may employ when you wish to stop work, and advise on the most suitable methods for securing protection.

Please contact us, whenever you feel that our specialist Pension advice is appropriate.

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