With all the speculation on what the Chancellor will or won’t do in the Budget, many individuals have or are preparing to make larger than normal pension contributions to capture the higher rate tax reliefs currently available.

The flip side of tax relief on contributions paid in, is a potential tax charge on excessive pension funds when they are paid out – this tax charge applies to pension funds in excess of the Lifetime Allowance and this allowance which is being reduced from £1.25 to £1million from 6th April 2016 – this assumes that Mr Osborne does not tamper with it in the March Budget.

With this in mind, it is very important to check the cash equivalent value of the current revalued amount of any deferred Defined Benefit pension you may have – the cash equivalent value is 20 times the current value of the revalued annual pension. Deferred defined benefit pensions normally increase each year by inflation or by some other level of indexation and in a few cases they may even benefit from discretionary increases awarded by the scheme Trustees. If the pension value has not been checked for some time, the chances are it could be much higher than its original value and, in turn, the cash equivalent value will also be higher. This could bring the total ‘pension pot’ closer to or in excess of the current or revised level of the Lifetime Allowance and if you think you may be in this position it may be prudent to seek expert advice before making an additional pension contribution now.