UK Edition
Pensions tax relief could be scrapped for high earners, according to experts
Philip Hammond could scrap pensions tax relief for higher earners next year, experts have suggested after the Treasury said it was “expensive” and should be targeted more fairly.
In documents published alongside the Autumn Statement, the Treasury said that tax relief on pensions savings is among the “most expensive” tax reliefs, hinting at reforms before the next election.
“In 2014 to 2015, this cost was around £48 billion with around two-thirds of the tax relief going to higher and additional rate taxpayers,” the document said. “It is important that resources focus where there is most need.”
Tom McPhail, head of retirement policy at Hargreaves Lansdown, told the Financial Times it was a clear hint that the Treasury is “going to take your tax relief away”.
However, a Treasury spokesman said: “We completely reject this suggestion – it is not true… The Chancellor did not announce any further changes to pensions tax relief in the Autumn Statement and has no plans to do so.”
The tax reliefs mean that whatever is added into a pension - as long as it is below the annual or lifetime limits - is topped up by the Government.
The amount you get depends on your income tax bracket - so higher income taxpayers receive more than a basic ratepayer from the Government for every £1 they save into a pension.
For a basic-rate payer to put £100 into their pension, they only need to make an £80 contribution.
A higher-rate payer - those earning between £43,000 and £150,000 a year - only need to pay £60 to achieve the same £100 of pension savings.