Posted by James McNeile, Partner
‘Government restricts amount of tax relief on pensions’
The government announced dramatic changes to pensions relief last Thursday, which will be introduced from April 2011. These include:
The annual limit that savers can put into their pensions tax free will be reduced from £225,000 to £50,000 from April 2011, a dramatic 80% decrease. If you want to put more than £50,000 into your pension you need consider taking action before April 2011.
Also the lifetime allowance on money that can be built up in a pension fund and receive tax relief has also fallen from £1.8m to £1.5m, but this will be from April 2012.
The effect will be negative on those that are high pension savers who will be affected by the reduced lifetime allowance. Similarly self- employed individuals are discriminated against as the model works on a regular income and regular pension contributions. Therefore it makes it difficult for those that wish to make a one-off payment to their pension fund.