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More on pensions

As mentioned in our posting on 19th Feb, there are numerous “attacks” that seek to claw back tax reliefs previously provided to incentivise tax payers to save for their retirement: the lowering of the pensions contribution limit to £40,000, the loss of additional rate tax relief, the reduction in the lifetime pension pots limits to £1m.

In the Budget later this month, George may be tempted to eliminate the billions provided in higher rate tax relief for contributions made into qualifying schemes. Will we see a flat rate of 25% or 30%? If nothing is sacred in this area, will we also see a lowering of the 25% tax-free sum?

A further nail in this particular coffin, for those who will not reach the State retirement age until 2028, is the five yearly review to be undertaken by CBI boss John Cridland. Those under the age of about 55 will be affected by the shake-up, which will consider what the state retirement age should be from April 2028. This could rise from the likely age 67 at 2028, to over 70… The results will be published next May.

HOWEVER, between now and budget day, 16 March, and maybe until 5 April 2016, persons with private pension arrangement have an opportunity to top up their contributions. For higher rate taxpayers this is a MUST DO.

Changes to the pension input periods (PIPs) during 2015-16 mean that the length of all the pension input periods that will end in tax year 2015-16 will be greater than 12 months. According to GOV.UK:

“Everyone will have a total annual allowance of £80,000 for 2015-16, plus any available carry forward. Individuals will then have an allowance of up to £40,000 for post-Budget savings plus remaining carry forward from 2014-15, 2013-14 or 2012-13.”

One tip may be to bring forward contributions planned for 2016-17 and pay them now to use up additional reliefs available in 2015-16?

Not a good time for sitting on a fence that is about to transform into a brick wall…

Our thanks to Bob Edwards for the content in this article.

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