15 October 2010
Yesterday the Treasury announced formal proposals on restricting
tax relief on pension contributions with effect from April
2011.
The change will reduce the current annual allowance from
£255,000 to £50,000, for defined contribution schemes.
The way contributions are valued will remain the same. i.e. both
employee and employers contributions are counted.
For defined benefit schemes, the multiplier used to value
benefits for the purposes of the annual allowance will increase
from 10 to 16.
Deferred members will be exempt. The government has also stated
that it will include an allowance for revaluation of accrued rights
for active members.
Members who exceed the annual allowance in any given year will
be allowed to use any unused allowances from the previous three
years. Carry forward (as it may be known) will be available against
an assumed annual allowance of £50,000 for the tax years
2008/09, 2009/10 and 2010/11.
Any benefit which exceeds the annual allowance will be taxed at
a rate that will be tailored to recoup the full marginal rate
income tax relief that a member will have benefited from instead of
the current fixed rate.
To view the draft legislation on these proposals please click here
