The annual allowance taper calculator, which is built and operated by Old Mutual Wealth, will be rolled out to advisers through February and March.
Former Chancellor George Osborne announced in Summer Budget 2015 that the pensions annual allowance would be reduced for those earning over a certain threshold.
Individuals with an ‘adjusted income’ of over £150,000 and a ‘threshold income’ over £110,000 are affected.
For every £1 of ‘adjusted income’ over £150,000 an individual loses 50p of their annual allowance. This tapering effect means someone with income of £210,000 is left with an annual allowance of just £10,000, a 75% reduction on the standard £40,000 annual allowance.
The taper came into effect from April 2016 meaning the first tax year end on which it has a bearing will be 16/17.
With the help of their professional financial adviser clients that are affected will be able to calculate their maximum pension funding opportunity using the tool from Old Mutual Wealth.
The calculator takes into account the complex rules around defining adjusted and threshold income, as well as any carry forward allowances available.
Old Mutual Wealth managing director of UK distribution, Scott Goodsir, says:
“We wanted to build something that automated the complex calculations involved in tax year end pension planning. Giving advisers this tool will allow them to simplify part of the advice process, focussing their attention instead on client engagement, rather than crunching figures to deduce their client’s annual allowance.
“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. Under the new taper this is especially important since the maximum allowance is so severely curbed for higher earners.”