Lower annual allowance is advisers' choice over relief cut
The majority of advisers and clients would prefer to keep pension tax relief at the marginal rate and have a lower annual allowance than see the Government introduce a £40,000 annual allowance but cap relief at 40 per cent.
AJ Bell surveyed 300 advisers and 580 clients and found capping contributions at £35,000 with tax relief at the marginal rate and the penalty for exceeding the allowance set at 40 per cent was the most popular option.
More than 58 per cent of advisers prefer this to the Government’s plan, where the annual allowance charge would be set at varying rates depending on income. This is supported by 24 per cent of advisers while 17 per cent choose other alternatives and 1 per cent say the existing taper system should continue.
Fifty-five per cent of clients want the coalition to introduce the £35,000 allowance with marginal tax relief while 28 per cent say the Government should go ahead with its own plan, 14 per cent want another alternative and 3 per cent prefer the taper system.
Marketing director Billy MacKay says: “The Government proposal does not sit well with the majority of clients or advisers. While there are people who suggest that tax relief has its flaws as an incentive, a reduced annual allowance with tax relief at the marginal rate is by far the most popular choice.”