The Government is to impose a lifetime limit of £1.4m on pensions savings. According to proposals in today's pensions Green Paper, there will also be an annual savings limit of £200,000.
As part of the new unified pensions regime, any amount saved in excess of these limits would become subject to tax though the tax privilege would remain on funds up to the limit. These limits will also be index linked.
Wentworth Rose chief executive Philip Rose says: “It is clearly a big improvement on the fixed percentages of earnings of earlier years where you couldn't take advantage of windfall year. On the other hand investment growth is penalised and brings with it a new tax risk.”
A spokesman for the Treasury says most people would be happy to reach the £1.4m limit but confirmed that anything over that limit would become subject to tax.