Government considers £50K annual allowance cut

The Government is considering proposals to cut the annual allowance for tax-privileged pension saving, according to the Financial Times.

In April last year, the Government reduced the annual allowance from £255,000 to £50,000. The lifetime allowance will also fall from £1.8m to £1.5m from April 2012.

During the consultation period prior to the changes ministers suggested the annual allowance could be set between £30,000 and £45,000. The FT suggests reducing the annual allowance could be used to pay for increasing the income tax threshold to £10,000.

The paper quotes a person close to Chancellor George Osborne saying: “This is being looked at, it is definitely a good way to be able to raise money to get towards the £10,000 tax rate.”

This follows comments from Treasury chief secretary Danny Alexander in the Telegraph at the weekend suggesting the Government could target higher-rate pensions tax relief in the Budget on March 21.