Pensions: Are You Missing Out?

As employment solicitors, we see clients dealing with pensions in three main areas.

  1. Compromise agreements, where clients often need to consider allocating all or part of their compensation to a pension, attracting higher rate tax relief.
  2. Business transfers, where I recently commented on some of the complex issues around early retirement benefits at
  3. Litigation, where the value of a diminished pension has to be calculated, usually according to the guidelines in ‘Compensation for Loss of Pension Rights’ published by the Stationery Office.

You may be interested in three other issues which caught my eye recently.

Why do over half of higher-rate taxpayers miss out on pension tax relief averaging £1020 a year?

They fail to claim it, according to research by Prudential. The problem is particularly acute for those who do not complete self-assessment forms, wrongly assuming their tax code reflects contributions to non-occupational pension schemes. If you are in this majority, act now. You can claim backdated tax relief for up to three years. Don’t wait until you complete a tax return.

Why are most pensioners in ‘capped drawdown’ not taking a pension, although their pension fund is subject to death tax at 55%?

These investors, according to Skandia, have taken the tax-free lump sum, but leave the rest of their pension fully invested. If you are in this position, you should consider taking a pension, taxed at less than 55%, even if you do not need the money. You can get tax relief if you invest the proceeds into another pension, which is free of death tax.

How could you lose £165,000 through the automatic enrolment in your workplace pension scheme, which starts in October?

Top earners could exceed HMRC’s ‘protected’ £1.8m cap on further contributions, if they fail to opt out. This triggers a tax at 55% on the value above £1.5m

Pension rules get ever more complex. If you need expert advice, beyond the scope of employment law, I can put you in touch with an excellent independent financial adviser.

Geoffrey Bignell, Chairman of Just Employment Solicitors




Geoffrey Bignell, Solicitor, Just Employment Solicitors.







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