Pension Tax Incentives
Is this the Last Chance Saloon?
The Government, HM Treasury to be precise, recently published this infographic illustration called “Ways to Save in 2017” and conspicuous by its absence was the option to contribute to a Pension.
How much can be read into that has been subject to hot debate, particularly in industry circles, but it is certainly a striking omission, fuelling further concerns that George Osborne’s proposals for another radical shake-up of Pensions, in particular the tax-relief incentive for contributions, did not bite the dust when he left the building.
At present, tax-relief is available at the highest rate payable – to the extent that it is paid - on personal contributions of up to £40,000 in this tax year, with the opportunity to carry-forward any unused allowance from the previous three tax years too.
There are some added complications, notably a sliding scale reduction in this year's Annual Contribution Allowance for those earning over £150,000 but nonetheless, it remains a generous concession, one costing HM Treasury an estimated £48 Bn last year.
In addition, Corporation Tax relief and savings in National Insurance for employer Pension contributions cost another £13.8 Bn.
For Chancellor Philip Hammond, under pressure to find money for other matters, most notably a hugely stretched National Health Service, clipping the current incentives for Pension savers may well prove too hard to resist.
It can only be speculation at this point, but it is looking increasingly likely that the March 2017 Budget will signal changes, either immediately or from 6th April.
This presents a clear opportunity in the meantime to maximise Pension contributions, to the extent that current rules and personal means allow, and enjoy one last hurrah, gaining the maximum possible incentive to save more towards a comfortable and fulfilling retirement.
If you wish to discuss your particular options, do not hesitate to contact us for a personal review.