Government moves position, slightly, on pension contributions
This year’s Budget proposed changes to the regime for tax relief on pension contributions. Essentially the proposal are that from 2011 higher rate tax relief will not be available to those with income over £150,000. To prevent a rush of people making large contributions before 2011 the Budget also proposed some anti-forestalling measures. These effectively capped the amount on which you could get higher rate relief to £20,000 unless you were already making regular contributions of more than that.
One of the problems with this was that 'regular' meant contributions being paid quarterly or more frequently. As a result many, such as the self employed, who paid annual contributions stood to lose out. It seems that the Government has listened to the arguments and moved their position a little. The Finance Bill has now been amended so that, for infrequent contributions (ie less than quarterly), an average can be taken over the last three tax years subject to a cap of £30,000 instead of £20,000.
The Financial Secretary to the Treasury (Stephen Timms) said in the Parliamentary debate that he would be consulting with the pensions industry about introducing regulations to be more flexible in respect of those who had set up new pension arrangements on or just before Budget day and those who change pension providers and carry forward exactly the same pension arrangements.
It is expected that the Finance Bill will receive Royal Assent later this month.
Barry Hallam is a tax adviser and a Senior Manager at Mercer & Hole. The views given in this blog are personal to the author.
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