The Treasury announces it is to lower the tax free pension annual contribution
An announcement by the Chancellor last week, was made to lower the limit on lifetime tax-free pension savings. Which meaning a punitive rate of tax will be levied on all pension pots totaling more than £1.25 million.
A male worker in the private sector would have to save £1.44 million to receive a £43,387 pension at current annuity rates. A woman would need to save £1.34 million. Ministers said the cap would affect only the extremely rich, but experts have warned that the new lower limit could hit workers who are members of final-salary schemes.
Lifetime cap reduction on pension funds has led some experts to warn that the Treasury could effectively be penalising pension managers who succeed in increasing the value of their funds. As well as reducing the lifetime allowance on pension contributions, Mr Osborne last week lowered the annual tax-free contribution limit to £40,000.
Financial advisers to some of Britain’s biggest companies warned that the latest reduction in the cap on pension contributions could also lead to the end of final-salary pensions in the private sector.
The National Association of Pension Funds also said new taxes on pensions would raise twice as much for the Treasury as changes in the levy on banks to help cover the costs of the financial crisis.
The path to adequate personal pension provision is becoming more and more complicated.