Pension Tax Relief Changes To Hit UK's High Income Earners

by Philip Morton, Investors Offshore.com

19 December 2002

Wealthy taxpayers in the UK are up in arms over a provision contained in a government Green Paper on pensions released this week, which will cap the maximum tax free lifetime pension contribution at around £1.4 million.

The document, entitled 'Simplicity, security and choice: working and saving for retirement' outlines a new Pensions Act which will simplify the existing regime, a move which has been welcomed by the industry. However, Work and Pension Secretary, Andrew's Smith's bid to remove a proportion of the tax relief available to high income earners is likely to spark controversy and calls from the UK pensions sector to raise the cap.

Although it is the country's very wealthy taxpayers, such as company directors and senior managers who are likely to be hardest hit, according to a Guardian report on Wednesday:

'Insurance firm Legal & General believes anyone earning more than £100,000 a year who, under the current rules, is putting the maximum 20% of their income into a pension will lose out. Financial advisers said the new tax relief limit would hit many of their customers and prove to be another barrier to saving.'

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