Tax measures on final salary schemes - changes from 6 April 2011

Who will this affect? Long service employees with modest pay increases

On 14 October 2010 two main changes to pension scheme tax relief were announced. These take effect from 6 April 2011, and are:

1. A reduction in the Lifetime Allowance from £1.8 million to £1.5 million in 2012, and

2. A reduction in the Annual Allowance for tax free contributions to a pension scheme from £255,000 to £50,000.

For an individual paying in to a Personal Pension Plan or in a Money Purchase Occupational Scheme, these limits are self explanatory, subject to some additional detailed rules. However, for Final Salary Pension Schemes, often referred to as Defined Benefit Schemes, the rules are very complex and full of elephant traps.

Read the full Insight on the right.