Sackers responds to HM Treasury consultation on the restriction of pensions tax relief

In the Coalition Government’s emergency Budget on 23 June 2010, the Chancellor, George Osborne, announced a review of the former Labour administration’s plans to restrict tax relief on pension savings for high earners.  Having already initiated an informal consultation, on 27 July 2010, HM Treasury and HM Revenue & Customs jointly published a discussion document  on a possible alternative approach which would see the annual allowance  reduced from its current level of £255,000 to an amount in the region of £30,000 - £45,000.  The consultation closed on 27 August 2010.

Eleanor Daplyn, Associate, says: “The relative simplicity of the Government’s proposed approach to restricting pensions tax relief is hugely welcome following the tortuous mechanisms which the previous administration had planned to implement.  However, that’s a silver lining on what could still be a big cloud; the plans could bring about some harsh and unfair results.  As the proposals stand, individuals on fairly modest incomes could face a very considerable tax hit at times when they are already struggling financially, such as on redundancy or when they have been forced to give up work because of ill-health.

The timing is also a concern – previous reforms to pensions tax relief have had a much longer lead-in time than is being proposed here and it may simply be too short for employers and pension schemes to take any necessary actions.”

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