Wealthy Need To Act To Protect Pensions From Tax Grab

Lisa Smith, BA (Hons), CeFA

Alarm bells are ringing for high earners and their pensions as Chancellor Phillip Hammond is reportedly sharpening his knives to cut tax relief on contributions in his upcoming Budget.

The pre-Budget leak is seen as Hammond and his aides testing opinion on the policy.

Slashing pension contribution relief for high rate taxpayers has been put forward before as a money raiser for the Treasury, but no action has been forthcoming from 11 Downing Street.

However, pulling higher rate tax relief is seen as a £38 billion cash cow for the Treasury without any downside with most voters who would be unaffected by the measure.

Funding gaps

Nigel Green, chief executive of deVere Group, a leading global financial advice firm offering pensions, investments and banking services to almost 100,000 expats, is cautioning high earners to act now to protect their retirement savings.

“The Chancellor has huge funding gaps to fill in public services and it can be expected that pensions will again be attacked to bolster government coffers. It is almost inevitable that pension tax relief will be a target as the government looks to plug gaps in November’s Budget. Many high earners will, as a result, be considering a review of their options sooner rather than later,” said Green.

“Such a raid on people’s hard-earned retirement nest eggs would highlight once more that successive British governments consider people’s retirement savings as easy, low-hanging fruit to be plucked when necessary.

“It could be that this story was deliberately leaked to drip-feed to the public the Treasury’s intention and take away the element of surprise. However, it does also allow people time to prepare.

Hammer blow for savers

“As it is likely the pension contribution relief for those on higher incomes will be reduced, many might now consider making a larger one-off contribution before the Budget, in order to benefit from the higher tax relief whilst they still can.”

“If Mr Hammond does announce this measure, it would be another hammer blow for those who have worked hard to get ahead in life through prudently saving for their future.

“Continually raiding pensions tax relief is helping to undermine a culture of saving at time when it has never been more necessary to promote it.”

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