So regular are the announcements of significant change to pensions rules that despite recent statements that details of the Government’s plans following the Pension Tax Relief green paper would not emerge until Budget 2016, consumers should still look to make the most of the current system as soon as possible.
Old Mutual Wealth pensions technical expert, Jon Greer, comments:
“The way I see it, the spending review and Autumn statement is an opportunity for the Chancellor to set the scene on a few rolling items ahead of the budget in March 2016. Consumers should also see it as a signal to undertake a review of their finances, both ahead of the statement itself and ahead of the budget and tax year end in April 2016. We do not expect to see any significant announcements this time but then nobody was expecting that in March 2014 either.
Use it or lose it
“In the first instance, if you are a higher rate taxpayer and have the ability to, and are thinking of, funding extra amounts into your pension, I would do so as soon as possible. This is because even though the chancellor has indicated that the government’s future plans on Pension Tax Relief will not be detailed until budget 2016 - with the likelihood that higher rate taxpayers will see a reduction in the relief available on their pension contributions - recent experience suggests we should expect the unexpected. My message to them would be to act now.
“As well as funding ahead of the Autumn statement, consumers should also be looking at the previous years’ annual allowances that may have gone unused. Few people are aware that you can use up to three years of unused allowances to fund into a pension, up to the value of your annual salary. This is particularly important as the annual allowance is expected by many to be cut from £40,000 as part of the government’s consultation on Pension Tax Relief. Post-April it will already be subject to a taper from £40,000 to £10,000 for those people who earn more than £150,000.”