The coalition are set to re-write the rules on pensions that will greatly restrict the tax relieved amount people can pay into their pension pots every year as well as the maximum pot size they can accrue.At present you can put up to Â£255,000 a year into a pension until you reach the Â£1.8 million pension pot limit.
According to the Telegraph the coalition want to reduceÂ the annual limit to between Â£0,000 and Â£50,000 while reducing the total pot size you can accumulate down to Â£1.5 million.
Overall the Treasury would benefit by Â£8 billion over the next three years.
PriceWaterhouseCoopers reckons that this move could affect 500,000 people in the UK.
But when one sees the figures involved it doesn't take a rocket scientist to see that the average guy in the street is not going to be directly affected by this. The only people who can accrue these sums are the very well off.
Also remember that this is not tax being imposed, it is relief being taken away. Now I understand that when the pension income is received it will be taxed as income, but that happens with other types of savings anyway.
The coalition are actually doing what the left never achieved, they are removing tax breaks for the better off.
The pension industry are a little miffed to say the least and are claiming that people on Â£40-50,000 a year will get massive tax bills if they get a modest pay rise that puts their pension contributions over the limit. Well I'm sure that the employer/employee can get together just to re-align the pension vs salary ratio and put the extra income into an ISA.
What it does mean for the pension industry is a lot less going into pension investments and therefore a lot less commissions and fees all round. Those on the average wage or below are notÂ going to complain about these changes very much are they?