CPPIB Cash in Lieu Allowance Guide

H ow to Value Employer Pension Contributions

• Money Purchase Pension arrangements are valued by the monetary amount that an employer contributes to an individual’s pension plan over the course of a tax year. • CPPIB’s Group Personal Pension plan that is administered by Aviva is an example of a Money purchase Pension arrangement.

AA Tax Charge

• If an individual exceeds their AA (and has zero carry forward allowance from previous years), the excess amount is included in their taxable income for the year. • In most instances, this will mean a 45% tax charge on the excess contribution over the AA. • As an example, if an individual who earns in excess of £360,000 receives an employer pension contribution of £20,000, this will be £10,000 above their tapered AA. The tax charge will be 45% on the £10,000 excess over the AA (£10,000 x 45% = £4,500 tax bill). It may be possible to instruct the pension provider to pay the tax charge from the underlying pension fund (as opposed to paying the tax personally). However, this depends on meeting certain time restrictions and other conditions. Impacted individuals should refer to the pension provider or their personal advisers for further details. • Be aware of how much carry forward allowance exists and how long this will last (see following example). • Where possible, take advantage of the Threshold Income rules by paying personal pension contributions. • Consider reducing your personal pension contributions if this protects your employer contributions. • Undertake all sensible tax planning strategies to reduce taxable investment income. • Consider any alternative options, such as CPPIB ’s Cash in Lieu Allowance Program, that may be available. Things to Consider

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