The Tory manifesto pledge to cut how much of the annual contribution someone earning above £150,000 can claim tax relief on would mean that if someone earning £250,000, contributing £40,000 a year to their pension will receive just £4,500 in tax relief, compared to £18,000 currently – a reduction of £13,500.
Adrian Walker, retirement planning manager at Old Mutual Wealth, comments:
“With Steve Webb among the Lib Dem casualties, it looks likely that the Conservatives will shortly be choosing their new pensions minister. Whoever is chosen, their priority should be to ensure the progressive pension reforms continue sensibly. Any Conservative pensions minister should look at their manifesto proposals very carefully to ensure they do not damage the attractiveness of pensions as a savings vehicle for high earners.
“For higher rate taxpayers concerned that the election result means tax relief on future contributions may be cut back, it is worth considering making additional contributions now while tax relief matches tax paid on income. Carry-forward rules mean that any unused annual contribution allowance from the past three years can be used, meaning an individual could actually make up to £120,000 in contributions.”