As widely predicted, George Osborne had brought in even more restrictions around tax planning with pension contributions.
The changes, to be implemented in 2014/15, will mean a reduction from £50,000 to £40,000 gross on the annual contribution limit; a lifetime allowance brought down to £1.25m from £1.5m; the restoration of the previous rate of income drawdown and an increase in the IHT threshold of one per cent. And the higher rate of tax relief remains.
I suppose we should all breathe a collective sigh of relief, but it continues the theme of watering down the incentives for pensions planning of the previous government. At the least, the fall in limits is not as great as that heralded over the weekend.
Nevertheless, the tax focused incentives remain for pension contributions, for now, and so it is clear that one should consider maximising use of these while they are still available.
I cannot recall pension allowances being increased so I wouldn't bank on these cuts being reversed once the economy is in recovery.
In short, people need to maximise contributions while they can as soon as they can. The plan may be then to close down pension funding in subsequent years - depending on circumstances - and switch at that point to alternative ways of investing and funding an income in retirement.
In short, people need to maximise contributions while they can as soon as they can. The plan may be then to close down pension funding in subsequent years - depending on circumstances - and switch at that point to alternative ways of investing and funding an income in retirement.
All of this, however, does seem to run contrary to government policy of encouraging people to save for their retirement, which is a worrying contradiction.
