What are your options?
Unlike Lifetime Allowance charges, Annual Allowance (AA) charges are not possible to mitigate through any form of protection. You do though have 2 main options if you still have a charge after allowing for carry forward.
- You can opt to pay the charge via your tax return through Self-Assessment
- Or you can elect to use the Scheme Pays option. In this case the liability is retained within the scheme and is paid by the employer from your ‘pot’ at the time the benefits are taken. However, the liability is a loan and is increased annually by a rate of interest, to be determined by HMRC. At the point that you take your pension benefits an actuarial factor will be applied to the AA charge plus interest and your total pension pot will be reduced accordingly.
If you are close or think you may be close to these figures we recommend you contact us for more information.