Over the last few years the Chancellor George Osborne has created a pension revolution that has been welcomed with open arms. He has introduced freedoms that allow pensions to be accessed easily or passed down the generations free of inheritance tax. Higher and additional rate taxpayers continue to receive tax relief on contributions at 40% and 45%.
So what next? From April 2016 new regulations will be introduced restricting the amount high earners can pay into pensions to £10,000. And there is speculation that George is looking to further restrict the current tax relief system by introducing a flat rate of tax relief, possibly 25%, rather than the current system of claiming tax relief at the marginal rate.
We don’t know what the Chancellor will say on Budget Day but the advice is clear. Higher rate taxpayers planning on making pension contributions should do so before 16th March to make sure they maximise their tax reliefs and planning opportunities. And if cash flow is an issue, think about switching some ISAs or speaking to your friendly bank manager – it’s too good an opportunity to miss.
PM+M Wealth Management Ltd is authorised and regulated by the Financial Conduct Authority.