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Govt makes concession on Budget pension changes

The Government has agreed to increase the maximum annual contribution allowed under its anti-forestalling measures from £20,000 to £30,000 a year, in the interim period before the pension changes come into effect.

The original rule meant those who did not have regular quarterly or monthly pensions contributions would only be able to receive full tax relief on the first £20,000 of contributions.

But the amendment, tabled on Friday, allows the smaller of either the average of an individual’s last three years contributions, or £30,000.

Financial Secretary to the Treasury Stephen Timms says: “The amendment tables to the Finance Bill will ensure that many more people contributing annually will continue to benefit from higher-rate tax relief on their full pension contribution until 2011.

“We want the legislation to be as fair as possible, whilst robustly protecting the exchequer.”

ABI director of financial regulation Peter Vipond says, while not perfect, this amendment should be welcomed.

He says: “We will continue to press for further relief for unfair cases to be dealt with through regulations and we maintain that the changes in pensions tax announced in the Budget were a retrograde and misguided step to take.

“This amendment is good news for those who have previously made their pension contributions annually, for instance the self-employed. The ABI continues to be in discussions with the Government over the proposed rules.”

But Standard Life head of pensions policy John Lawson says: “The Government has made only the meagrest of concessions to the self-employed and small business owners most affected by these proposals.

“Those in company schemes who pay pension contributions monthly are treated more favourably because they can protect their full historic contribution level without limit. There is no justification for penalising entrepreneurs in this way.”

The anti-forestalling measures were introduced to stop abuse of the relief system ahead of the proposed reduction in pension tax relief for high earners.

In the Budget, Chancellor Alistair Darling outlined plans to taper tax relief on pension contributions for people earning more than £150,000, so that those earning £180,000 or over would only receive the basic rate of relief.

These changes are due to come into effect in April 2011.



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

  1. Julian Stevens 6th July 2009 at 10:36 am

    Govt makes concession on Budget pension changes
    Given Darling’s claim that only 1% of the population would be affected by these changes, they clearly have nothing to do with “protecting the Exchequer” or doing anything to shore up its presently ruined state ~ they’re just a tax attack on high earners. But then what do you expect from a Labour government?

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