PIERCE VIEW: Pensions

Yet more tinkering with pensions, as expected the lifetime allowance will reduce to £1m from April 2016 but with transitional protection available.

Tax relief on pension contributions for high earners will be restricted. The annual allowance of £40,000 will be tapered by £1 for every £2 of income over £150,000 subject to a minimum of £10,000 from April 2016. Anyone likely to affected by these changes should consult with their IFA as soon as possible and consider maximising pension contributions in the current year.

There will be rules to prevent the manipulation of income, and to provide a safeguard for individuals whose income is normally below £150,000 but in a single year goes above that amount as a result of a one off payment.

The current system of pension tax relief is considered unsustainable and a consultation will begin on wider reforms to pensions. It is thought that something akin to ISAs will be suggested with no tax relief on the contributions into the pension but the pot being taken out tax free.