Specialist Tax News

Pension Scheme Contributions

We’ve now been told exactly what the new rules are to be for contributions from 6 April 2011 – in place of the previously announced rules from the old government where in particular there were to be restrictions in the rate of tax relief available if your income exceeded £150,000. Simplicity is the name of the game here (that’s refreshing for a start), and tax relief will be available at your top tax rate subject to restrictions in what you can contribute as follows:

Lifetime allowance
2010/11   £1.8 million
2011/12   £1.8 million
2012/13   £1.5 million

Annual allowance
2010/11   £255,000 (subject to anti-forestalling measures)
2011/12   £50,000

The aim is to raise the same amount as under the previously announced rules – that was a somewhat ambitious £3.5 billion per year by way of loss of tax relief – but clearly still being able to get tax relief at your top rate on a maximum contribution of £50,000 is an attractive proposition.

Just one word of warning, but only if you are a member of a final salary pension scheme from a large employer where they have changed the way that an increase in your pension benefits can be measured in terms of the new and reduced contribution limit of £50,000. We will be pleased to advise on this.

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