Pension savers to take advantage of tax breaks
Thousands of higher and additional rate taxpayers will take advantage of current pension rules in the coming weeks in order to maximise their contributions, pension experts have said.
The flux of wealthy pension savers is predicted in light of speculation that the Government is in discussions concerning the reduction of the annual pension allowance and the removal the 50 per cent tax rate in the coming Budget.
Currently, savers have an annual pension allowance of £50,000, but speculation is mounting that this could drop to £40,000 or lower in next month’s Budget. According to The Telegraph, a drop by £10,000 could potentially cost higher-rate tax payers up to £4,000 in tax relief each year, whilst those who pay tax at the highest 50 per cent rate could lose up to £5,000 of tax relief.
It is believed that the restrictions on how much savers can put in a pension will cause those with sizable pension funds to up their contributions in the coming months in order to take advantage of more generous allowances.
The Government has made significant cuts to the annual pension allowance in recent years which have seen it fall from £225,000 to £50,000. The overall lifetime limit will also reduce from £1.8 million to £1.5 million from 6 April 2012.
Pension experts are now encouraging pension savers on all levels to weigh up their pension options sooner rather than later, as any changes that are made, could be effective immediately on Budget day – 21st March 2012.
Commenting, Adrian Walker, pension expert at investment platform provider Skandia comments: “Slashing the annual allowance available on pensions is a real possibility. The government seem determined to find a way to increase the personal allowance to £10,000, and reducing the pension annual allowance will mainly affect those that are more affluent.
“Maximising all available allowances is certainly something everyone should do, especially those who pay tax at 40 and 50%, and they need to take action now, before budget day.”
We can help you to plan for retirement. Please contact us to find out more.