Pension Tax Relief: could it finally be scrapped?

In News by craig

Pension Tax Relief: could it finally be scrapped?

After years of toing and froing, could PTR finally go in the Autumn Budget?

9TH OCTOBER 2018

It’s been over two years since George Osborne infamously attempted to alter the current pension tax relief system. Although the move was met with a vociferous backlash back in 2016, PTR remains low-hanging fruit for his successor.

Could a tax relief cut be on the cards again before the end of the year, and what form could it take?

Earlier this month, the Centre for Policy Studies noted that over two-thirds of this relief goes towards those in the higher tax brackets, instead calling for a “broader savings base”. The think tank recommended that pension tax relief be replaced by a system whereby earners would receive ‘top-up’ bonuses based on contributions to their pension pots.

The report predominantly focuses on the need to encourage more people from across a broader socio-economic spectrum, but the proposal could also free up £10 billion a year for the Treasury’s coffers.

Philip Hammond steered clear of tax relief changes – and pension changes in general – in his first Autumn Budget last year. However, the Chancellor will be looking to raise £20 billion towards the Prime Minister’s NHS funding pledge, and tax relief is thought to be one of the last so-called “pots of gold” to raid.

What could this mean for your pension?

At present, higher-rate taxpayers can claim 40% pension tax relief, with additional-rate taxpayers able to get back another 5% on top of that. This drastically reduces the cost of pension contributions, particularly for those in the highest income bands.

Any changes to the current system is likely to hit those in the upper echelons hardest, should the Chancellor move to replace PTR with some form of pension ISA.

Philip Hammond’s Autumn Budget could yet be three months away, giving rise to further rumour and speculation.

If you are keen to utilise this relief before any potential changes, getting the most out of your pension pot contributions, get in touch with us today.

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