Pensions: Tax Relief

Higher-rate tax relief for top earners on pension contributions was one of the biggest stories from this year’s Budget, but the news should prompt everyone to look at their pension arrangements. There are a number of knock on effects which could eventually affect everyone. The level of tax relief to date has made it attractive for top executives to support expensive defined benefit schemes. The removal of these reliefs at the highest level, however, is bound to change the balance. Defined benefit schemes have been under threat for some time as companies find them increasingly expensive to run. Barclays, Morrisons and potentially even Royal Mail are just the latest to highlight issues which could reduce benefits, at the very least for new employees. However, it is not just the loss of defined benefits which needs to be considered. In removing full tax relief for high earners on their pension contributions, the Chancellor has demonstrated that these benefits are not necessarily something any of us can rely on. Equally, just as pension income is becoming less certain, the cost of living for pensioners is rising. This leads to one inescapable conclusion – to ensure yourself a healthy, wealthy retirement, you need to start planning. Starting early is always a good idea because the longer the period over which you make contributions, the more you benefit from the compounding of interest. However, as an added bonus, if you start now, you also ensure you make the most of the current tax reliefs available, just in case. To ensure a wealthy retirement call Mark or Clare at GMP Independent Financial Advisers LLP, for a free initial consultation.