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Categories:Pensions,Politics

Government considers £50K annual allowance cut

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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.

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Readers' comments (8)

  • Please, stop meddling. How on earth can:

    - providers plan and put in the necessary controls
    - advisers deliver longlasting durable and confident pension advice
    - investors have faith in a savings system that continually moves goalposts

    Pensions and their associated advice are long term commitments and partnerships. Constantly changing the terms is damaging and unnecessary.

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  • Here are a few novel ideas you may wish to consider George to fund a £10k nil rate band rather than clobber the pensions of people trying to do the right thing and stand on their own feet;

    1. Slash the quango Bill from £80 BILLION to say £20 BILLION

    2. Stop spending BILLIONs on overseas wars

    3. Stop giving thousands of pounds in benefits to fit and healthy people. Limit maximum benefits to no more than the minimum wage.

    4. Slash the £1 TRILLION public sector pensions bill.

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  • @ Greg - 8.35
    Greg couldnt agree more with you however it is not in any governments nature not to bring changes in - Makes them feel they are achieving something. If they are going to keep meddling why do they just not go back to the pre A-day rules and be done with it, ie an incremental percentage of NRE based on age. Everyone new where they stood. Closer to retirement you got the more you put in.

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  • Keep reducing the pension input allowance and no one will save towards retirement and just keep their money in cash or in their companies and release when they close it, so everyone looses out, the advice sector, life companies, investment industry and also the retailers who benefit once they retire and spend their self sufficeint incomes. Nice one George.

    Of all the clients who can affrod to put £50,000 into their retirement pot, good on them for taking advice on their future, after all they do spend the income eventually but keep taxing them to death and they wont have it to spend.

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  • Pension regulation is like waiting for a bus - you either get nothing or three turn up at the same time.

    I agree with many stop meddling, it’s no wonder the general public have no faith in the pension industry when government keeps meddling like this for what after all is just political point scoring

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  • Can we have some realism here?

    The government is cutting everything - even the benefits for disabled children (contrary to a promise made by David Cameron). Job seekers allowance is being cut, housing benefit is being cut, disability living allowances are being cut....

    So cutting something that only impacts on people who can afford to pay £50k a year into their pension seems pretty small beer when set against cuts that are genuinely impacting on peoples lives and living standards - whether they can actually afford to give their kids a decent meal for seven days a week.

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  • Hi Strummerville

    We have a massive savings shortfall in the UK and cutting pension allowances could be a big mistake as it puts even more UK citizens off saving. What we talking about here is trying to make people self-sufficient and not rely on the state. Some people don't start putting in large amounts of money into pensions until relatively late on in life, so a cap like this could have some particular undesirable effects. We are not only talking about the highly paid executives or some high paid individuals in the public sector, we could be talking about individuals that have received inheritances and want top up their pensions.

    It's interesting that the Liberals are getting really hung up on tax relief on pension contributions whilst not realising that we have a massive pension shortfall and tax relief is the main reasons why people put money into pensions in the first place

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  • One is tempted to ask why the government doesn't just own up and say that it intends to eradicate all incentives to save into any sort of pension plan other than NEST.

    LTA cut, annual input allowance cut, plans afoot to cut further the annual input allowance, plans afoot to cut the 25% TFC at retirement allowance and TFC now renamed PCLS, which surely hints at plans to tax it. And, of course, no action whatsoever to fix all the other damage inflicted on the pensions framework over the past 25 years, despite the Conservatives' pre-election manifesto pledge that this would be one of their prioroties if they were elected.

    It's looking increasingly likely that upon attaining the age of 55 later this year, I shall vest my pension funds, take as much TFC as I still can and redirect all future savings to Unit Trusts.

    Pretty soon, for anyone other than those in a public sector DB pension scheme, the only thing worth saving into long term will be an ISA and I think that's exactly what this government intends.

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