More than four-fifths (84%) of advisers are struggling to accurately calculate the tapered annual allowance for clients, Suffolk Life has found.
The self-invested personal pension (SIPP) provider said the majority of advisers were struggling to work out a client’s income down to the pound, which was necessary when working out a tapered annual allowance.
Of the 84% of struggling advisers, 41% were able to calculate thresholds and adjusted incomes before the end of the tax year for some clients, while 43% were unable to complete the calculations for all or most clients.
The SIPP firm found half of the 175 advisers it surveyed at its ‘Why SIPP it?’ roadshows in May and April therefore had clients who contributed to their pensions based on estimates.
Pension technical manager Jessica List said: “These findings suggest that a significant number of advisers have clients who either stuck to the £10,000 minimum allowance regardless of their income, or much worse, were put off from contributing altogether.”
The government made a number of changes to pension taxation following its 2014-15 pension freedom reforms. It introduced a taper mechanism for pension contributions from high-earners, which saw the annual allowance drop by £1 for every £2 of a person’s adjusted income over £150,000 (income added to pension contributions).
Suffolk Life said the calculations needed to work out the tapered allowance proved complicated for clients with just one source of income, as this could be affected by the end of the tax year by things like a pay rise, but they are even more diffcult for clients with multiple sources of income.
The firm said the calculations presented a “chicken-and-egg” scenario, as clients would need to know their total income for the year in order to work out how much to contribute to their pension.
The post Four-fifths of advisers struggle to calculate tapered annual allowance – Suffolk Life appeared first on Retirement Planner.