MSE News: Pensions tax relief slashed to save £4 billion a year

This is the discussion thread for the following MSE News Story:

"The tax-free amount people can save is being cut from £255,000 a year to just £50,000 from April next year ..."
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Comments

  • The £50K is still subject to higher rate relief, though.

    Time, I would think, for a few people to grasp all the cash they can find, and have a major "dump in" before April 6th.
  • WestonDave
    WestonDave Posts: 5,154
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    I'm guessing that most people who can afford to put more than £50k a year into their pension plans probably don't spend a lot of time on a site called Moneysavingexpert. If you have that much left over, its a fair bet they are on salaries of over £250k a year.
    Adventure before Dementia!
  • stampede
    stampede Posts: 240 Forumite
    WestonDave wrote: »
    I'm guessing that most people who can afford to put more than £50k a year into their pension plans probably don't spend a lot of time on a site called Moneysavingexpert. If you have that much left over, its a fair bet they are on salaries of over £250k a year.

    I presume people who have this much money have someone that does this sort of thing for them...why bother mingling with the riff raff...lol
  • dunstonh
    dunstonh Posts: 116,040
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    edited 14 October 2010 at 10:10AM
    Guy, if you are reading this, your article has made the same mistake the BBC article has. I'm guessing that the source is being copied by the various media outlets.

    i.e.: The Government also plans to reduce the lifetime pensions savings allowance that benefits from tax relief from £1.8 million to £1.5 million from April 2012.

    The lifetime allowance has nothing to do with tax relief. Its the amount a pension fund (or notional fund value) can grow to without suffering a lifetime allowance charge. Someone with a fund value in excess of the lifetime allowance (and without transitional relief) can still contribute to a pension and get tax relief on their contribution.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • Time, I would think, for a few people to grasp all the cash they can find, and have a major "dump in" before April 6th.

    Thats the plan. I know quite a few owner managers that are looking into this. Our accountant has even suggested borrowing to do this (obviously subject to a decent forward order book)

    The lifetime limit reduction is a bit of a blow but I suppose it is fair.
  • dunstonh
    dunstonh Posts: 116,040
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    I presume people who have this much money have someone that does this sort of thing for them...why bother mingling with the riff raff...lol

    Many of them would have applied for primary and/or enhanced transitional relief back in 2006 as well. Enhanced protection disregards the lifetime allowance.

    Over time, the number with transitional relief will fall to zero but those that dont have it are unlikely to be that affected by the changes from a retrospective point of view but will be going forward from a planning point of view.

    I think the biggest losers here are those with small pension pots who could have done triviality but now cant.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • dunstonh wrote: »
    Guy, if you are reading this, your article has made the same mistake the BBC article has. I'm guessing that the source is being copied by the various media outlets.

    i.e.: The Government also plans to reduce the lifetime pensions savings allowance that benefits from tax relief from £1.8 million to £1.5 million from April 2012.

    The lifetime allowance has nothing to do with tax relief. Its the amount a pension fund (or notional fund value) can grow to without suffering a lifetime allowance charge. Someone with a fund value in excess of the lifetime allowance (and without transitional relief) can still contribute to a pension and get tax relief on their contribution.
    dunston: they're asking for you over on the debate house prices, economy,etc. board. seems they're just as confused on this.
  • Reaper
    Reaper Posts: 7,277
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    One thing nobody has mentioned is that it pretty much destroys Immediate Vesting Personal Pensions which can be useful for pensioners wanting to covert lump sums to a good income.
  • WestonDave wrote: »
    I'm guessing that most people who can afford to put more than £50k a year into their pension plans probably don't spend a lot of time on a site called Moneysavingexpert. If you have that much left over, its a fair bet they are on salaries of over £250k a year.

    You need to read the small print. As I see it, even a relatively low income earner in a DB scheme could be trapped by this, particularly if you leave work early with a pension enhancement. Someone on £35k in a 1/60th pension scheme given 6 years enhancement would exceed the £50k allowance.
  • jamesd
    jamesd Posts: 26,103
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    Reaper, how does it do that? A pensioner with no employed income is already limited to £3600 gross pension contributions a year with tax relief and the proposed annual cap is far above that. Where's the benefit of a pension annuity compared to a non-pension annuity that would make an immediate vesting personal pension appropriate for someone who's already retired?

    A prospective pension who's about to retire could presumably use the past years' allowance that was mentioned. Some in this group presumably will be affected by the cap.
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