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Further Tinkering to Pensions Announced in Queen’s Speech

In the Queen’s Speech on 27 May 2015, the Conservatives delivered on their manifesto pledge to scale back tax relief on UK pension contributions in order to fund increased free childcare in the UK.

Currently, if a person is contributing to an UK occupational or personal pension, the government gives tax relief on pension contributions which reduces a tax bill or increases a pension fund. In the UK a person can save as much as he or she would like into different registered pension schemes and get tax relief on contributions of up to 100 per cent of earnings each year, provided it is paid before age 75. The amount saved each year into a pension is limited by an annual allowance which in 2015/2016 is £40,000. Any contributions made above the annual allowance is subject to UK tax.

Several commentators have criticised this further tinkering of the UK pensions’ regime, particularly reductions on tax relief, as it may discourage future pension savings. It is not yet known how far the tax relief reductions will go, however, the Conservatives had already highlighted that the 45% top rate of tax relief would be removed.

 

Photo Credit: “House of Commons: MPs debate 2013 Queen’s Speech” is copyright (c) 2011 UK Parliament and made available under CC BY-NC 2.0