View more on these topics

£50k annual pension cap too restrictive, says Skandia

Skandia has warned a reduction in the annual allowance on pension contributions to £50,000 would be overly restrictive and discourage long-term savings via pensions. 

Many industry experts have called on the Government to reverse its planned restriction on higher-rate pension tax relief for those earning over £130,000, due to be introduced next April, and instead to reduce the annual allowance to £50,000.

Skandia says the Government is already saving money by freezing the lifetime pension allowance until 2016 and should not impose a lower limit on contributions at the same time. The provider says many individuals make modest or no pension contributions in their early professional years and make up for this with significant contributions in later life when they have more excess income.

Platform marketing manager Adrian Walker says to reach the current lifetime allowance of £1.8m, an individual would have to save £43,919 for 25 years, assuming an annual growth rate of 5 per cent. 

He says: “If they delayed this by 5 years they would have to save £60,768 every year to reach the allowance.  With a cap on annual contributions at £50,000 these people would never be able to make up the difference required to reach the lifetime allowance.”   

Walker believes the Government should instead extend the freeze on the lifetime allowance for at least a further five year period beyond 2016 or even reduce it. 

He says: “If the Government does impose a lower cap on annual pension contributions it should at least remove the lifetime allowance limit to encourage people to save over long periods of time without fear that they will incur another tax charge by exceeding the limit and allowing them to benefit from whatever investment returns they are able to achieve through that period of time.” 

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There is one comment at the moment, we would love to hear your opinion too.

  1. I should imagine, or at least I would hope, that one of the government’s lowest priorities just now is incentivising (with our money) people to save more than £50,000 a year towards their retirement.

    Get real please Skandia!

Leave a comment

Close

Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm

Email: customerservices@moneymarketing.com