The Chancellor has begun further consultation looking at the way you save for your retirement. The way that pensions are looked at has changed drastically over the last few years, which means that this consultation hasn’t been welcomed by everyone.The current situation
At the moment you get tax relief when you pay into your pension savings. When you retire you may have to pay income tax depending on the level of your total income.The proposed changes
The consultation is suggesting that the situation is reversed and instead of getting tax relief on the savings you make during your working life, you are able to draw the pension tax free when you retire.
We don’t yet know how the proposed changes will affect you if you already save into a pension scheme. There is a lot of debate in the professional press about whether this proposal will make you less inclined to pay into a pension if there is no upfront tax relief.
The debate has only just begun but the eventual outcome of the consultation will impact everyone.Government savings
If upfront tax relief is withdrawn there is no doubt that the Government will make significant savings in the short term, and with the reduction in tax relief for high earners announced in the Budget there is a lot of speculation that the changes won’t stop there.
The outcome will be interesting.
If you have any questions please contact your normal Lovewell Blake contact.