Pensions - Articles - Relief as other pensions tax perks remain untouched

Steven Cameron, Pensions Director at Aegon UK comments: “Today’s announcement of capping the National Insurance exemption on pension contributions through salary sacrifice to £2000 is a blow. From 2029, many employees will lose the extra boost they are currently getting to their pensions from National Insurance savings. Those sacrificing more of today’s salary for a higher contribution towards their retirement income may question why the Chancellor is penalising them. This comes shortly after the Government set up an independent Pensions Commission to look at how to ensure more people are saving adequately for retirement. And what’s clear is that too many people across the earnings spectrum aren't saving enough to achieve an adequate income for their retirement. 

 

“However, the change mustn’t be allowed to discourage people from saving in pensions for their future. Despite the salary sacrifice changes, the Chancellor confirmed pensions continue to offer the benefits of tax relief and a tax-free cash entitlement. This year, like last, there was extensive and harmful speculation that the Chancellor would cut entitlements to the tax-free lump sum. This remains intact with individuals able to take up to 25% of their pot tax-free, subject to a maximum of £268,275.  

 

“There were also fears over cuts to the tax relief top-ups individuals receive on contributions made into pensions. Under the continuing system, the Government boosts personal contributions at your highest marginal income tax rate, up to a generous annual allowance of £60,000. Given pensions are long-term investments, which can’t be accessed until age 55 (rising to 57 in 2028), it’s important that people have confidence in these tax incentives, encouraging them to save for their futures. We can’t afford another year of Budget ‘hokey cokey’, which has led to some individuals taking pre-Budget actions they might later regret. We urge the Government to confirm no further changes to the pensions tax system, at least for this Parliamentary term.”