Fast-track law may freeze pension income threshold
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Draft legislation, expected to be fast-tracked through Parliament this week, will not require any inflation-linked rise in the threshold income levels at which higher-earners will be taxed on pension contributions from next April.
If the Government chooses not to increase thresholds, the initial £130,000 at which pension tax relief begins to be tapered will be equivalent to around £100,000 by 2020, according to Towers Watson.
The Finance Bill 2010 confirms that a new “high-income excess relief charge” will apply to individuals whose gross income is at least £150,000 if the value of any employer contributions or defined-benefit pension accruals is included and at least £130,000 if this is excluded.
Towers Watson says the Treasury could raise the thresholds through regulation but the bill does not introduce an expectation that they will rise with inflation each year.
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