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Skandia fears further curb on pension relief

Skandia is warning that the Government could further restrict higher-rate tax relief on pensions to raise revenue.

It says tax relief on contributions made by salary sacrifice or as personal contributions to an occupational pension scheme could be 60 per cent for people earning £100,000 £112,950.

The removal of higher-rate tax relief on pensions for people earning over £150,000 is expected to affect around 291,000 people but Skandia says the Government may restrict relief further to affect over three million people who are higher-rate taxpayers but earn less than £150,000.

Gross pension tax relief is estimated to have cost the Government £29.3bn in 2007/08, with a quarter of this sum going to the 1.5 per cent of savers earning over £150,000.

The Government expects to increase revenue by £3.1bn thr-ough the changes to higher-rate pension tax relief but Skandia says: “This represents just 11 per cent of the total tax relief given to pension contributions and it is likely that further measures will be needed to tackle unprec- edented borrowing levels which are anticipated to total £528bn over the next five years.”

Head of tax and financial planning Colin Jelley says: “It is important that the estimated 3.3 million people who are higher- rate taxpayers and are not yet caught by any restrictions to tax relief on pension contributions consider accelerating their pension funding if they can in case any further restrictions are imposed.”

Intelligent Pensions technical director David Trenner says: “If you have got money and you are earning enough to be eligible for 40p tax relief, grab it while you can. Curr- ent rules can be changed by this Government without any compunction.”

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

  1. Higher Rate Taxpayers
    Colin, you’re out of date with higher rate taxpayer numbers.

    The HMRC estimate for ALL higher rate taxpayers 2009/10 is 2.91m – a big drop from 2008/09 thanks to hikes in personal allowances and the width of the basic rate band, not to mention constrained income growth. The numbers are to be found on http://www.hmrc.gov.uk/stats/income_tax/table2-1.pdf

    The 2006/07 income distribution stats (see http://www.hmrc.gov.uk/stats/income_distribution/3-3tabledec08.pdf) show 283,000 with £150K+ incomes

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