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Govt considers cut to pension tax relief annual allowance

George Osborne 480

The Government is considering cutting the maximum annual tax-free pension contribution limit in next month’s autumn statement.

According to the Financial Times, chancellor George Osborne (pictured) met with senior coalition members on Monday to discuss the Government’s proposals. Osborne has previously pledged to balance welfare cuts with new taxes on the wealthy.

A source told the FT that moves to reduce pensions tax relief for the wealthy are “on the table”.

In the 2010 emergency Budget, Osborne cut the maximum tax-free pension contribution from £255,000 a year to £50,000, although the Government previously consulted on introducing an annual limit of between £30,000 and £45,000.

The FT says a £40,000 limit would raise £600m, while a £30,000 limit would raise £1.8bn.

Prime minister David Cameron has reportedly blocked calls for a new council tax band for the most expensive properties and opposed the introduction of a mansion tax.

In March, shadow chancellor Ed Balls called for pension relief for higher rate tax payers to be capped at 26 per cent, with the extra revenue spent on reversing cuts to tax credits.

The Liberal Democrats support the axing of higher rate pension tax relief altogether.

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Comments

There are 13 comments at the moment, we would love to hear your opinion too.

  1. I’m not dead against tax rises in any form but when you increasingly disincentivise retirement saving you are cutting muscle and bone not fat.

  2. All they want us to do is spend our money not save it.

    Same as Brown.

  3. So to encourage pension saving they are going to alter the rules again and send out negative vibes to the public – you couldnt make it up!

  4. Cut taxes. Stimulate growth. Get VAT back to 10%.

  5. Ah Richie

    The TRUTH. They bleat on about getting the public to save, but this is all crocodile tears. If they did save seriously they would naturally be better off, but our stupidly run economy – which completely relies on people going shopping – would just collapse completely.

    I get so fed up hearing those in financial services and government forever banging on about getting people to save – it is just either complete ignorance or cant and hypocrisy.

    The better off do save and in so doing their thrift trickles down to the rest of the economy. Now they are going to be further disincentivised, so their savings will reduce, their manoeuvrings will increase or they will just emigrate – sooner or later. And there are those who try to persuade me that Westminster is not 100% populated by complete numpties – who are constantly on the diddle themselves.

  6. Skint pensioner to be 20th November 2012 at 9:57 am

    So the posh boy is going to penalise saving for one’s retirement and let the people who push the housing market beyond the point where ordinary folk can afford to buy a house get off without paying a level of Council tax they can clearly afford.

    I somnetimes think that as well as the Bullingdon Club Comrade Gideon was a secret member of the Oxrord University branch or the Revolutionary Socialist Liberation Front (trotsyist-Lenninist), a secret group of students wo swore to dedicate their lives to pi****g of the masses to the point where they finally rise up and kill the rich / ruling class en masse.
    Their work nears completion even as we speak…..

  7. Dear Skint Pensioner

    I don’t know where you live, but in some suburbs – both in London and elsewhere – if you had bought a house for (say) £350,000 15 years ago it is likely to be worth over a million today.

    So say someone of 55 had purchased then. They are a 70 year old retired pensioner today. It is by no means clear that they can afford current council tax rates – let alone any mooted increases.

    You have merely assumed and for your information ASSUME means that it makes an ASS of U and ME.

    House price inflation is not of the making of those who live in expensive houses, but of stupid government policy – cheap money and unfettered immigration – for which you have the Labour party to thank.

  8. Protect owners of mansions at the expense of hard working professionals wishing to save for their retirement. Interesting long term plan ! Hope this country doesn’t need engineers / scientists / entrepreneurs.

    Pensions are deferred tax to incentivise saving. Vote UKIP or stay at home in 2015.

  9. Change change and more change. Leave things alone

  10. And of course will any of these proposed changes have the slightest effect on the pensions our wonderful MP’s will enjoy when they stop (sic!) working? Do not think so!!

  11. There is apparently No mechanism to pick up the increases in value in a member’s Defined benefit scheme when it exceeds the contribution limit in a given year. To exceed say £30,000 a year in increase in value a member’s pension increase would be £1,500. IF a member of say the civil service scheme with say 20 years service enjoys a £5,000 a year promotion or salary increase their ‘contribution’ for the year would exceed £30,000 and they would therefore have an income tax bill to pay BUT would they be aware of that?

  12. This government’s recovery strategy, and almost every other government around the world, relies upon the public spending their money not saving it. Don’t they realize that this toxic recipe is what has led to the current situation! Millions of people are carrying around huge amounts of secured and unsecured debt that was encouraged during the last government’s reign, and made us all think the country was experiencing a boom! If they haven’t already gone bankrupt or walked away from the debt with an IVA, then every penny the public earns for the next 20 years will be used to pay off their existing debt. How or why would they go out and spend more!!!!!!

  13. arthur | 21 Nov 2012 11:50 am

    Yes they would. They would receive a statement from the scheme administrator each year showing them the position regarding the annual allowance.

    Unfortunately, this would be after the event so they would have a tax bill they couldnt avoid.

    This is why they should use a financial adviser who would be able calculate the tax impact of an additional years service and/or salary increases.

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