High earners need to act fast on the Chancellor’s tax break plans
George Osborne could slash pension tax relief as early as this month. As such, Britain’s higher earners should consider reviewing their pension tax relief strategy sooner rather than later.
This latest move is, in effect, yet another tax raid. The Chancellor has already indicated towards plans to modify the existing pension tax breaks in the next Budget. The Annual Allowance will be brought down from £40,000 to £10,00 for a large number of the UK’s higher earners – and there will be substantial tax charges for individuals who exceed the threshold.
But some experts predict he could fast-forward this in this month’s Spending Review (25 November) in order to help plug a hole in the Budget. Consequently higher income earners are advised to reassess their financial strategy as soon as possible to help make the most of their retirement funds.
The time to act is now!
To my mind, many high net worth individuals will want to take action before this month’s Spending Review. They could, for example, consider making a larger, one-off contribution so as to benefit from the increased tax relief.
I see reducing pension tax breaks as, depressingly, another recurring hammer blow for individuals who work hard and sensibly plan for their future.
It goes against the very concept of saving – when it has never been so important to do so. Saving for retirement is now more than ever a personal responsibility; we’re all living longer, health care costs are rising, and both state and private pension pensions are less generous than they were before.
As such, and taking into account the consequences for Britain and the families of a growing older population with dwindling financial resources, deterring saving could result in devastating consequences.
Hence it is up to us as advisers to do everything possible to reignite a robust, long-term savings culture.