The focus for this could be the annual allowance tapering already due to come into effect in April. Below is a comment explaining this in more detail and a table showing the impact it would have on people at different income levels.
Andy Bell, chief executive of AJ Bell, comments:
“Changes to the lifetime or annual allowances for pensions will be seen as a desperate last throw of the dice by the Chancellor to balance the budgets.
“Don’t be surprised if the Chancellor plays the last card in his hand by tinkering with the income threshold at which pension tax relief starts to be curtailed. This could come down from £150,000 to £125,000 or even £100,000 and so, whilst higher rate tax relief would remain, it would be greatly restricted for many more people.
“Any further change to the lifetime or annual allowances, would be a retrograde step by the Chancellor and one purely motivated by the desire to save money. People need to be encouraged to save more into pensions and to do that we need a period of stability where the positive impact of the pension freedoms and auto enrolment can be allowed to take effect.
“I’d like to see the creation of an independent Pension Commission to manage UK pension policy and provide that stability for investors but in the meantime people should be maximising their use of pension tax relief while they can.”
Assuming someone fails the tests for adjusted and threshold income, this would be the impact of any further reduction in the annual allowance tapering rules:
|
Income level * |
Annual allowance from 6 April based on today’s rules |
Annual allowance from 6 April based on taper starting at £125,000 |
Annual allowance from 6 April based on taper starting at £100,000 |
|
110,000 |
£40,000 |
£40,000 |
£35,000 |
|
125,000 |
£40,000 |
£40,000 |
£27,750 |
|
150,000 |
£40,000 |
£27,750 |
£15,000 |
|
175,000 |
£27,750 |
£15,000 |
£10,000 |
|
200,000 |
£15,000 |
£10,000 |
£10,000 |
*Based on ‘adjusted income’, not earnings. Also assumes that the ‘threshold income’ level is breached. Adjusted income includes earnings, investment income, plus all pension inputs minus personal contributions.