Post Budget – Future Changes To Maximum Pension Contributions
- Author: Christopher Howard
- Published: 21/07/2010
The Labour government had previously been changing the pension rules to reduce or remove higher rate tax relief on pension contributions, for those earning over £130,000, down to the point where those earning £180,000 would have only received a pension tax relief at the basic rate (20%).
However, the June 2010 budget contained proposals which should be good news for future pension funding for those with higher incomes. The proposals, which are still in the consultation stage, are likely to set an annual allowance limit at £30,000 to £45,000 from 6 April 2011, meaning that higher rate tax relief will still be available for high earners, albeit with a limit on contributions.
This proposal will affect a wide range of people regardless of whether they have a high income or not, which is going to create an urgent need for many individuals to review their pension plan once these proposals have been formalised.
Those who are not restricted under the anti forestalling provisions, (broadly individuals with income less than £130,000 in the 2010/11 tax year), have until 5 April 2011 to take advantage of the current higher Annual Allowance and make a substantial contribution to their pension - i.e. up to 100% of gross earnings.
Those with higher incomes (£130,000 or more in the 2010/11 tax year) can continue to make tax efficient pension contributions for the rest of the year - up to certain levels covered under the anti forestalling provisions - until the new annual allowances come into effect. As the current anti forestalling rules are particularly complex, please seek professional advice from your financial adviser if you are affected.
What now?
If you would like more information about personal pensions and private pensions or to review your current pension plan please contact IFA (Independent Financial Adviser) Christopher Howard on 01603 218 008 or email choward@alanboswell.com.
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