Government restricts amount of tax relief on pensions by Christopher Hall

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.

Please contact Head of Private Client Christopher Hall on cdh@royds.com or 020 7583 2222 for further advice.