During his pre-Budget report speech, Darling said: “Under existing rules the highest earners benefit disproportionately from tax relief on pensions and at the moment a quarter of all the money spent on pension tax relief goes to the top 1.5 per cent of earners.
“To make this fairer I announced in the Budget we would reduce pensions tax relief for people with incomes over £150,000.
“I want to do this as fairly as possible regardless if they recieve pay as current salary or as a future pension benefit and prevent avoidance so I have decided to include employer pension contributions in the definition of income for this tax measure.
“But to provide certainty we will introduce a floor so that irrespective of the size of the employer pension contributions no one with an income below £130,000 will be affected.”
Standard Life head of pensions policy John Lawson says: “The relevant income limit for the special annual allowance has been cut from £150,000 to £130,000 from today which will catch around another 150,000 higher earners.”
Skandia head of tax planning Colin Jelley says: “All the planning seems likely to focus around both the new £130,000 threshold as well as the previously announced £150,000. This added complexity will increase the need for those affected to get appropriate advice.”