Is the pension allowance under threat?

26th October 2018

As we head towards the Annual Budget Statement, due on Monday 29th October, rumours are rife about a potential reduction in the pension annual allowance. Following the Chancellor’s recent comment that the cost of pension tax relief was “eye-wateringly expensive” some pundits believe the pension annual allowance is in Mr Hammond’s sights.

Currently, individuals can potentially put up to £40,000 into a pension each year, and gain tax relief. This represents a significant tax saving, particularly for higher rate tax payers, and is a compelling reason for investing in a pension as part of long-term financial planning. Under current rules, savers are able to ‘carry forward’ their allowance for up to three years, although we may also see a reduction in that flexibility.

Both the pension annual allowance and the lifetime pension allowance have been targeted in the past. It is perhaps not surprising that further restrictions may be implemented, particularly given the greater flexibility which now exists regarding how savers can extract money from their pension fund.

Depending on your personal circumstances, there is strong argument for making additional pension contributions to maximise current tax relief if, as expected, future opportunities are likely to diminish.

We will be watching the Budget announcement with interest on Monday – if you would like to receive our annual budget report summarising the Chancellor’s announcement, please sign up here.

For more information on pension planning, please contact Tom Driver on 01926 422292 or tom.driver@hboltd.co.uk