Removal of higher rate relief on pension contributions
Pension contributions made by an individual are usually paid net of basic rate tax and where the individual is a higher rate taxpayer further relief is due which significantly reduces the net cost of the premium. For example a cash contribution of £100 receives a basic rate credit of £25 which is added into the pension fund. The gross contribution of £125 then attracts relief at 40% of £50. After taking into account the basic rate relief already given, the individual has further tax relief of £25 which takes the net cost of the contribution down to £75.
The government has announced its intention to restrict tax relief on pension savings with effect from 6 April 2011 for people with taxable income of £150,000 or more. The relief will be tapered down until it is 20%.
Legislation will be introduced to prevent those potentially affected from seeking to forestall this change by increasing their pension savings in excess of their normal regular pattern, prior to that restriction taking effect.
The forestalling measures will apply to individuals with incomes of £150,000 or more who from Budget Day, change:
* their normal pattern of regular pension contributions, or
* the normal way in which their pension benefits are accrued, and
* their total pension contributions or benefits accrued exceed £20,000 a year.
Inside this issue:
Higher Rate Relief: Larkings provide some useful facts
Retirement Funds: Have you safeguarded your future?
Wealth Creation Specialist - May 2009 Newsletter
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A pension is a long term investment. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation.
As our life expectancy increases, so, too do the number of years that we can expect to spend in retirement. Soon many people may well spend more time retired than they did in work…if they can afford to!
Why do so many of us constantly push the thought of Retirement Planning to the backs of our minds?
* It seems so far off
* I don’t what to commit to something I can’t stop and start if I need to
* I am reluctant to put my savings out of reach for the long-term
But, delaying your pension planning will have a significant and dramatically negative effect on your potential retirement income. Find out how you can protect yourself today from this 'cost of delay' by talking to us about the choices available.
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