FST announces changes to restricting pensions tax relief
Mark Hoban MP, Financial Secretary to the Treasury, has announced that the Government will abandon the previous Government’s proposals and will instead restrict tax relief on pension contributions by reducing the annual allowance (AA) to £50,000 from April 2011.
The CIOT thought the original proposals were disproportionately complex and had significant administrative burdens, and in correspondence we had suggested reducing the AA as an alternative means to achieve the Government’s objective.The FST’s announcement is therefore most welcome.
However, the flat factor to compute deemed contributions to Defined Benefit schemes has been set higher than we thought it should be and it is disappointing that the AA will not be indexed in line with earnings.We are also concerned that the lifetime allowance is set to be reduced and the impact this will have.
Additionally, there are some areas where further discussions will be needed, such as how we deal with overseas schemes and how we value contributions to hybrid schemes.
CIOT Technical Officer
27 October 2010