Old Mutual Wealth (OMW) is launching a pension planning calculator ahead of the tax year-end to help advisers deal with complex changes to the annual allowance.
The calculator will take into account the challenging rules around defining ‘adjusted’ and ‘threshold’ income, as well as any carry-forward allowances available. It will be hosted on Old Mutual Wealth’s website and rolled out to advisers through February and March.
The tool was set-up in response to demand from financial planners looking for support in dealing with the annual allowance taper.
In the 2015 Budget, the then Chancellor George Osbourne announced the pensions annual allowance would be reduced for those earning above a certain threshold. Individuals with an ‘adjusted income’ of more than £150,000 and a ‘threshold income’ above £110,000 have been affected.
For every £1 of ‘adjusted income’ over £150,000, an individual loses 50p of their annual allowance. The tapering effect results in those with an income of £210,000 being left with an annual allowance of just £10,000, OMW pointed out – a 75% reduction on the standard £40,000 annual income.
As the new rules came into effect in April last year, savers will be affected for the first time at the end of the current tax year in April 2017.
OMW managing director of UK distribution Scott Goodsir said the tool would allow advisers “to simplify part of the advice process”, enabling them to spend “more time on client engagement and less time crunching numbers”.
“We wanted to build something that automated the complex calculations involved in tax year-end pension planning,” he added.
“Taking advantage of the annual pensions allowance is crucial to good financial planning, allowing clients to maximise their long-term savings capacity and ensuring they don’t forgo the opportunity to fund using carry-forward.”
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