Pensions conundrum

Q: I would like to invest more in my pensions this year while I can get 50 per cent tax relief. Can I do that?

A: NHS Pensions has confirmed that it cannot calculate your annual contribution in relation to the new £50,000 annual allowance until 31 March 2012.

This £50,000 allowance figure applies to the total of all pension benefits accrued or contributed to in the current tax year, therefore including your NHS pension, as well as contributions to all other pension schemes.

In relation to defined contribution schemes, it is simply the value of the contributions made that count towards the £50,000 annual allowance. But with your NHS pension, a more complicated calculation must be done to determine how much of the £50,000 annual allowance it uses up. It is not simply a matter of whether you have contributed £50,000 during the 2011/12 tax year as it is the deemed benefit accrual of the scheme over the tax year.

As it is a complicated calculation that will vary according to your role, we recommend that you seek professional advice.

In some cases your private pension arrangements may actually push you over this £50,000 limit, and you could end up with a large tax bill on the 'overfunded' contributions.

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