Will making pension contribution before Dec 5 help?

donblount

I have read from various media sources (including FT) about the potential changes to pension contributions in UK. Pension contribution allowances could be reduced and/or the pension relief for higher rate tax payers could be reduced. Number of articles mentioned that making contribution before Dec 5th would help in avoiding these changes?

I don’t quite understand how this would work. Would I get the full tax relief (not just the basic tax relief) if the contribution was made before Dec 5th. Normally SIPPs will give you the basic tax relief immediately, higher rate tax relief is obtained only at the time the tax returns are filed at the end of the year. Will I not be affected by the new changes regardless of when the contributions were made?

hugheskevi

I have read from various media sources (including FT) about the potential changes to pension contributions in UK.

There are always pension articles written before Autumn Statement (and the pre-Budget Report, which the Autumn Statement replaced) and the main Budget.

Pension contribution allowances could be reduced and/or the pension relief for higher rate tax payers could be reduced.

Yes, that is a usual story. The twist this year seems to be speculation of a reduction to the Annual Allowance to £30,000 or £40,000.

Number of articles mentioned that making contribution before Dec 5th would help in avoiding these changes?

In this case, they are speculating that (a) there will be a change and that (b) it will apply from the Autumn Statement onwards. They might be right, but probably aren't.

I don’t quite understand how this would work. Would I get the full tax relief (not just the basic tax relief) if the contribution was made before Dec 5th.

It would depend on how the law was changed, assuming that it were changed.

In reality, abolishing higher rate relief would be a big change, requiring consequential changes to salary sacrifice (as a minimum). You will end up having to bring employer contributions to account, which for Defined Benefit schemes would be extremely complicated.

The idea of doing it in the middle of a tax year is fanciful to say the least. The most extreme I'd anticipate is an announcement of intention to abolish in the future, with some sort of anti-forestalling measure, such as lowering Annual Allowance to £30,000 whilst a detailed consultation is undertaken.

If you take action in response to this speculation, you will be doing the same every November and March from now on

somethingcorporate

Yep, every budget and pre-budget I get emails and letters from HL scaremongering about the reduction of allowance and potential abolition of HR tax relief. So far it has been fanciful and an inducement for you to put more of your money in!