2010 provided a raft of tax changes, revised rules and various consultation papers which will impact us all over the coming weeks and months. However, despite constant change, there continues to be multiple opportunities to add value for your clients in the run up to tax-year end and beyond.

The recently published review of tax reliefs issued by The Office of Tax Simplification may not initially carry any weight of change but demonstrates the need to use available reliefs and allowances while they continue to be available.

The suitability of each of these opportunities will depend on your client’s individual financial situation.

Planning considerations

These break down into two parts:

• Clients still building retirement savings using pension wrappers (accumulation).
• Clients already taking benefits from their pension (decumulation).

Accumulation

For individuals subject to the current anti-forestalling rules that apply until the end of this tax year:

• Where applicable ensure that they pay a special annual allowance contribution of £20,000.
• Ensure they make any infrequent money purchase contributions up to the threshold that applies for them.
  Contributions for these thresholds can go to any registered pension scheme.
• Ensure existing protected pension input contributions continue to pre 22 April 2009 or pre 9 December 2009 scheme(s) or alternative group schemes with at least 20 other active members in the same contribution category to keep protected pension input status.
• For large protected pension inputs – check the pension input period. If it currently ends in 2011/12 tax year – review whether funding since 14 October 2010 will exceed annual allowance of £50,000 that applies for 2011/12. May need to stop contributions for a period of time to avoid a liability for an annual allowance charge arising in 2011/12.
• Can a relievable personal contribution of up to £20,000 potentially linked with gift aid payment bring relevant income below the £130,000 threshold for the 2010/11 tax year? Such action may exempt client from being subject to anti-forestalling rules allowing higher funding before the end of this tax year without a special annual allowance charge.
• For clients with adjusted net income over £100,000 for  the 2010/11 tax year, can they make relievable pension contributions that will regain their personal allowance. This has the potential of achieving the equivalent of 60% tax relief on the contributions.
• Pay pension contribution of £3,600 (gross) for any non-working spouse or civil partner,* children or grandchildren who will receive tax relief of 20% in the current tax year.
• Maximise the payment of personal contributions of up to 100% of relevant earnings to benefit from up to 40% tax relief for individuals not subject to the anti-forestalling rules.
• Pay pension contributions to offset against realised life policy chargeable gains in the 2010/11 tax year.
• Use salary sacrifice where employee and employer NI savings can increase the pension contribution at no cost to the employer. This is of particular interest for those with earnings above £40,040 in the 2010/11 tax year.
• For employed individuals not subject to anti-forestalling rules – can employer contributions be added to any personal funding to increase pension input for the 2010/11 tax year? Clients should ensure they pay such contributions to an arrangement where the pension input period can end by 5 April 2011. This will ensure the funding is against the annual allowance of £255,000 that applies for this tax year before the reduced annual allowance comes into force.

Decumulation

• Clients aged over 55 considering drawing benefits using income withdrawal, should consider crystallisation of benefits before the end of the tax year. This will lock clients into a five-year review based on current GAD limits rather than the rates and the three-year review periods that will apply on crystallisation from 6 April 2011. We expect the new income limits to be lower than those currently applying.
• Recycle excess income as a contribution to improve tax efficiency of a client’s retirement funds. The maximum is £3,600 if a client has no relevant earnings, but could be greater where relevant earnings still apply.
• When gifting excess income for this tax year ensure clients take the relevant income withdrawals before the tax-year end. From a Skandia perspective this means income withdrawals taken in March 2011.
• Review impact of potential additional designation. This may deliver higher maximum annual income on an existing income withdrawal fund for the rest of the existing five-year period, and will benefit from the potentially higher maximim income limits that will apply on additional designations before 6 April 2011.
• Ensure transfers of income withdrawal arrangements are completed by 5 April 2011 to preserve both the maximum annual income and the remainder of the client's current five year review period.