Pensions - Articles - High earners act now to reduce tax!

 Commenting on a potential cut in pension allowances, Bhargaw Buddhdev, partner at Barnett Waddingham, said:

 “Currently high earners on annual salaries of £150,000 or more pay income tax at the top rate of 50% on all earnings in excess of £150,000. This top rate is expected to reduce to 45% from 6 April 2013. These high earners could receive less tax relief on their pension contributions and should consider paying additional contributions using the “carry forward” allowance from the previous three years, in order to get tax relief at 50% before the rate reduces to 45%. 

 “The Autumn Statement 2012 will be made by the Chancellor of the Exchequer on 5 December 2012. Whilst a further raid on pension contributions of high earners can only be speculation at this time, high earners need to consider and act now to maximise their contributions should further restriction on pension contribution tax relief for high earners be announced in the Autumn Statement.

 “Individuals need to ensure that they do not exceed the lifetime allowance for pension savings at retirement, which is currently £1.5m. Any benefit in excess of the lifetime allowance will be subject to lifetime allowance tax charge. If an individual has Enhanced Protection or Fixed Protection then further contributions to a defined contribution arrangement will cause them to lose their protection.

 “The expected impending tax reduction will require careful consideration and individuals should seek independent financial advice to ensure their tax planning, ahead of April 2013, provides the best possible outcome.”