People hit with annual allowance charges over £2000 will be able to use their pension benefits to meet the payment, the Treasury confirms.
In a statement issued today, the Government says pension schemes will be required to operate the facility only where an individual exceeds the new £50,000 allowance outright within that scheme in the relevant year.
This follows concern that some individuals could experience high charges if their pension value increased significantly in a given year.
Treasury financial secretary Mark Hoban (pictured) says: “We have abandoned the previous Government’s complex proposals and developed a solution which will help to tackle the deficit, but not hit those on low and moderate incomes. We have taken a tough but fair decision.”
In October, the Government announced that the annual allowance for tax-privileged pension saving would be slashed from £255,000 to £50,000 from April, 2011. The lifetime allowance will also be reduced from £1.8m to £1.5m from April, 2012.
The changes will save the Treasury an estimated £4bn a year, around the same as the previous Government’s proposals.