The Government is proposing to implement an annual allowance for pension contributions of £40,000 and suggests this could be indexed – reports Money Marketing.
The key points from the Money Marketing article are that in a consultation document on the restriction of pensions tax relief, published today, are proposals to
- Restrict the possible annual allowance for pension contributions to £40,000.
- Slash the lifetime allowance from £1.8m to £1.5m adding that this should raise between £100m and £200m by 2014-15, increasing over time. It says this change would create the possibility of indexing the annual allowance over the longer term.
- The consultation also proposes capping tax relief at 40 per cent on savings below the annual allowance, even for additional 50 per cent taxpayers.
- The Government is also considering freezing the value of rights covered by primary and enhanced protection. It says: “This could mean that any increase in value after that date would be subject to the lifetime allowance charge when benefits are crystallised. This would remove much of the complications associated with existing enhanced and primary protection rules and fit better with current policy.”
Money to the Masses must stress that this is just a consultation paper and so its contents are a mile away from becoming pension legislation. But this paper does highlight the coalition’s intentions, i.e. to restrict the amount you can put into a pension each year as well as the amount of tax relief claimable on pension contributions. So high rate tax payers planning on funding their pensions later in their careers and those with large pension funds beware.
But frustratingly for the public, pensions legislation will be changing once again leading to more confusion.