Pension contributions limited to 30k pa

[SueEllen]

Put your postcode in writetothem.com and your MP should come up.

[IR35 Avoider]

After Googling "write to my MP" to get a contact page, this is what I wrote:-

In the budget it was announced that a method for restricting the cost of tax relief on pensions is to be considered, restricting the annual allowance.

A fairer way to restrict relief would be to restrict the lifetime allowance rather than the annual allowance.

The implication of restricting the annual allowance is that people such as the self-employed and those on short fixed-term contracts, who have irregular earnings, with possibly only a few high-earnings years in their whole career, will be entitled to less overall relief than those who hold secure higher-paying jobs for extended periods.

[IR35 Avoider]

If they want to restrict relief, they should restrict the lifetime allowance, not the annual allowance. Why should it be OK for someone to go from £1 million to £1 million + £30,000, while preventing someone else going from £0 to more than £30,000 in a single year?

Some people ("someone I know") might only have a few years of good earnings in which to build up a pension, restricting annual relief amounts to saying they're allowed less overall relief than someone who's a high earner over a long period of time.

I suppose I need to write to my MP, for what that's worth.

[centurian]

Would hardly describe it as a hidden bombshell.

During his speech, he mentioned that there would be an alternative mechanism for getting the cash. As he didn't lay out the specifics, you would therefore expect to find those details in the full report.

[GreenerGrass]

Got this in some email from ContractorFinancials, not that I use them for anything:

Hidden Pensions Bombshell
When George Osborne stood up to address the house with his emergency budget, hundreds of thousands of savers, many of who are Freelancers collectively held their breath as we waited to hear the decision on higher rate tax relief.

Many would have been relieved to hear that there will be no change to the ability to receive relief at your highest margin rate of income tax over the coming tax year however, as the afternoon went on, an alarming discovery was made in the small print of a treasury document that accompanied the budget report.

Osborne hinted that there would be a consultation with industry professionals and governing bodies to decide another way to plug the £3bn hole left in the deficit by not cutting the higher rate relief for pensions, and worryingly, it looks like their solution may be to lower the annual limit for contributions. A paragraph in the treasury’s document reads “provisional analysis suggested that an annual allowance in the region of £30,000 to £40,000 might deliver the necessary yield”.

This could have disastrous implications for the many Contractors who currently use pension investment as a way of minimising tax liabilities. If the annual limit is reduced from its current level of £255,000 to just £30,000 then this will severely restrict the ability to tax efficiently transfer funds from contract and into personal hands.

Been used to H-L, much as I like them, scaremongering about the end of higher rate tax relief for some time but this tighter annual cap sounds much more likely than abolishing it altogether.
It would mean a change of strategy for anyone planning on stuffing in over £50k pa in their last few years of contracting to make up for low contributions over much of their previous working life.
Not sure if company contributions would get round it - e.g. your company could gross £130k but you could put 50k pa in a SIPP, be immune to any pension rule changes, and also avoid the effective marginal 60% tax rate over 100k. Or will they add up employer and employee contributions when calculating your limit...