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Further attack on pensions tax relief

The Government recently announced its intention to substantially reduce the annual limit under which people may obtain tax relief for pension contributions. 

The current annual limit is £255,000 and it is expected that the limit will be reduced to £50,000 from April 2011. In addition, from April 2012, the lifetime allowance is expected to be cut from £1.8m to £1.5m.

Whilst this will be a substantial blow for many high earners who are already having to consider the current anti-forestalling legislation when making pension contributions, there may also be a knock on effect for employees on final salary pension schemes who may end up with an unexpected tax bill clawing back tax relief.
 
There is no indication at this point of additional anti-forestalling measures being implemented over and above those which are currently in force which restrict tax relief to 20% for one- off contributions under certain circumstances; however this cannot be taken for granted.

It would be advisable to consult with your financial advisers with a view to considering topping up contributions before April 2011.

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