High-earners told to add to pensions before PBR
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Hargreaves Lansdown is writing to higher-rate taxpayer clients recommending they make any planned pension contributions before next week’s pre-Budget report.
The firm fears Chancellor Alistair Darling may extend the changes he made in March’s Budget to taper tax relief on pension contributions for people earning more than £150,000, potentially down to earnings over £100,000.
Pension analyst Laith Khalaf says: “It makes sense for any higher-rate taxpayers to make this year’s contribution before next Wednesday just in case the goalposts move. Hopefully, they will not but the link between the tax relief you get and the tax you pay has already been broken for those earning over £150,000.
“It would not be too difficult for the Government to go back over that legislation, replacing £150,000 with £100,000 or any other number for that matter.”
Informed Choice chief executive Nick Bamford says: “I would be surprised if there were a further lot of changes to higher-rate tax relief on pensions but I would not be shocked. It could happen and if it does, I cannot see the Tories changing it back if they get elected.
“People who were intending to make contributions anyway may as well do it before next Wednesday but if they were not planning to do so they should not lose sleep over it.”
Standard Life head of pensions policy John Lawson says: “The general direction of taxes will be upwards and a Labour Government is always likely to favour raising these from the relatively wealthy.
“They could bring the £150,000 pension tax threshold down to £100,000, which would catch another 291,000 higher-rate taxpayers to add to the 281,000 above £150,000 who were caught earlier this year. Advisers should encourage their clients to top up their pensions now if they can afford to lock money away until retirement.”
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