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PBR: pensions relief threshold down to £130K- 150K more affected

The Government has extended the pension tax changes announced in April’s Budget so people earning £130,000 or more will be hit rather than the original £150,000 threshold.

In the pre-Budget report the Government predicts the new rules will affect an extra 85,000 people, 300,000 compared to 215,000 originally. But Standard Life believes the new restrictions could affect 150,000 additional people.

The anti-forestalling regime limits the level of higher rate tax relief savers can receive on pension contributions before April 2011.

The longer-term changes, which will come into force from April 2011, originally meant people with income of £180,000 and more would only receive basic rate tax relief.

Those with income between £150,000 and £180,000 would get tax relief somewhere between basic rate and higher rate on a sliding scale.

But the Government has now decided the definition of relevant income, used in determining whether an individual is affected by these changes, will include employer pension contributions.

Those with incomes below 130,000 before the inclusion of employer pension contributions will not be affected.

Senior pensions policy manager Andrew Tully says: “In simple terms, anyone with income of £130,000 or more will not receive higher rate tax relief on their contributions.

“This is a very disappointing move, further breaking the long-standing principle that an individual receives tax relief on their pension contributions at their highest marginal rate.

“Continuous changes to pension tax rules do nothing to encourage saving, and we urge the Government not to proceed with this move. We need clear, simple rules for the long-term to encourage more people to save and help address chronic under-saving in the UK.

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. Pensions simplification, dontcha love it !

  2. Another nail in this government’s coffin for private sector pension provision. These people ought to be hung, drawn and quartered.

    They say one thing and do quite another ~ a bit like the FSA, come to think of it.

  3. Where pensions are concerned this Government should be known as ‘Claudio Ranieri’ AKA ‘The Tinkeman’. Everytime I speak to people they are put off pension savings because this Government wont leave alone for any period of time.

  4. Why, when Pensions Simplication introduced the Lifetime Allowance, do we need to further restrict pension contributions for the higher paid. It can only be a vindictive attack by Labour on the entrepreneurial classes.

    Roll on the election.

    Far better that the Chancellor made a serious attack on Public Sector pensions and the pensions of MPs and Civil Servants.

    This is just another attempt by Gordon Brown and his government to destroy the retirement aspirations of many people.

    I hope Mr Brown will be proud of his legacy!!!!!

  5. If I had a freepost envelope with NO11 Downing Streets address on it, I’d post my CII Pension “Simplification” manual back to No 11 and ask for my money back for both the manual and the exam.
    I’m more tempted to just vote with my feet and if I ever meet the residents of No10 or 11, ram it where the sun don’t shine so it can be as much of a pain for them as the continual pension tinkering has been for us….

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