Pension penalties for footballers and trapeze artists
Professional footballers, trapeze artists and badminton players are among those who could face high tax charges on retirement, due to their ability to retire early.
A range of categories of professionals are subject to special retirement ages, allowing them to retire as young 30 years old, in some cases, rather than the statutory minimum of 50.
However, this could have implications after A Day (6th April) as anyone allowed to retire early will have to consider the new Lifetime Allowance (LTA) for pension savings. For the 2006/07 tax year the LTA will be £1.5 million and will increase to £1.8 million by 2010 at which point the statutory minimum retirement age will increase to 55 years old.
According to Standard Life, anyone with a special retirement age will have their LTA reduced by 2.5% for each year remaining between their chosen pension age and the statutory minimum. Any pension benefits over the LTA could be taxed at 55%. The other option for those affected is to find alternative careers and keep working until later in life.
Margaret Craig, customer communications manager at Standard Life, said: “It is entirely possible that football’s top earners could face tax bills running into hundreds of thousands of pounds if they want to take advantage of their special retirement ages. However, the problem could be the same for any high earners who, due to their type of employment, have a special retirement age.”