By MATT BRUNWIN 29/07/2010
The recent consultation paper issued by the Treasury this week, has proposed further changes to pensions contribution rules in an attempt to make the rules clear and easier to understand.
New limits on contributions
The proposals published by David Gauke, Exchequer Secretary to the Treasury, recommend that the amount each person can contribute to a pension each year will be limited to £30,000 - £45,000. This contribution will be eligible for full tax relief.
The current rules allow for annual contributions of up to £255,000, but with limited tax relief, depending on your earnings and contribution history.
The new proposals will replace the changes made by the last Labour Government, which looked to taper down tax relief on pension contributions for higher earners. The current system is viewed as too complex and difficult for savers to understand.
Who will be affected?
The changes will affect more savers, particularly those who are higher rate tax payers earning below £130,000, as the amount they can contribute to their pensions would be limited and they were unaffected by the previous rule changes
What can you do?
As the paper is still in consultation phase, it is likely the changes will not come in until next tax year (starting April 2011). Therefore, if you are considering making a large pension contribution and believe you may be affected by the new rules, then you may wish to do this sooner rather than later.
How we can help
Bestinvest offer a SIPP Service, where you can buy unit trusts and OEICs at no initial charge with free switching between funds. If you are looking to contribute and/or can transfer pensions with a total value of £50,000, then we can offer this SIPP Service at no cost to yourself. In addition, one of Advisers will carry out a free review of your pension investments.
For further information please visit SIPPs at Bestinvest, or speak to one of our Investment Professionals on 020 7189 9999.