Today’s announcement by Chancellor of the Exchequer that he wants to take further measures to promote increased levels of savings is welcome but Mr Osborne needs to proceed with caution, argues investment platform provider AJ Bell.
“I have long been of the view that there is scope for the convergence of pension and ISAs and look forward to reviewing the green paper and subsequent outcome,’” says Andy Bell, chief executive AJ Bell. ”It is good to see that wider changes will be consulted on rather than rushed through. However I would urge that final changes are kept simple so as to not deter people from making long term provision for retirement through whatever means. Today’s restriction of tax relief for high earners, for example, is as expected, but it is nonetheless disappointing because it adds another level of complexity to pensions.”
Notes for Editors
Today’s Budget featured two key changes relating to pensions and ISAs.
- Tax relief on personal pension contributions will be restricted for those earning over £150,000 per year. From April 2016 for every £2 earned above that limit, you lose £1 in annual allowance. Anyone earning over £210,000 a year will therefore be able to contribute £10,000 a year into a pension with tax relief, rather than the current maximum of £40,000.
- Chancellor Osborne is to investigate further pension reforms, designed to promote greater savings, and he suggested pensions could be treated like ISAs, whereby taxed money goes in and there is no tax on the way out.