Fiona Tait, Business Development Manager at Scottish Life, responds to the Budget 2012
"It's good news that the chancellor has resisted the temptation to make further changes to the treatment of pension contributions. The rules were substantially changed in 2011 and a period of consistency will allow more people to become familiar with the advantages and limitations on pension planning. Further changes could have created an additional disincentive to save for retirement and potentially undermined the government's plans for automatic enrolment.
"Instead of this we have the very welcome confirmation that pension tax reliefs will be unchanged and the introduction of a flat rate state pension which will make it easier for individuals to assess whether they will benefit from making additional pension saving.
"Two other changes are in themselves less welcome but do provide an incentive to make pension contributions.
"Firstly the delay in reducing the current 50% tax band to 45% in April 2013, whilst disappointing for those looking for an immediate reduction in their tax bill, provides an opportunity to maximise savings before the change applies. Using current allowances and the facility to carry-forward unused annual allowance some savers have a last chance to make a substantial pension contribution this year and receive up to 50% tax relief.
"Secondly the removal of age-related personal allowances only underlines the danger of relying on the state in retirement. Those whose income is just above the proposed new personal allowances will bit hit hardest by the removal of the age-related allowance. Those with more substantial private pensions will be proportionately less affected and may also find it possible to retire when they want to, regardless of the state pension age that will apply."
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