Predictions of a ‘tax raid’ should be heeded by high earners planning retirement – and swift action should be taken, caution the experts
Britain’s top earners should consider reviewing their pension tax relief strategies “sooner rather than later” – that’s the advice from the chief executive of one of the world’s largest independent financial advisory organisations.
Nigel Green, deVere Group founder and CEO, issued the warning amid predictions that chancellor George Osborne may slash pension tax relief imminently. “Let’s be clear: this is a tax raid,” he continued. “The time to act is now for those who could be affected.”
Green pointed out that the chancellor has already hinted at changes to existing pension tax breaks in the Autumn statement. “The Annual Allowance will be slashed from £40,000 to £10,000 for many higher earners, and there will be hefty tax charges for anyone who goes over the threshold,” he said.
“However, he might bring these plans forward to help plug a hole in the budget. As such, those on higher incomes should review their strategy sooner rather than later to help mitigate being stung and to make the most of their retirement savings.”
Making a larger one-off contribution in order to benefit from the higher tax relief is one way top earners can prepare for the changes, according to Green, who describes the slashing of pension tax breaks as “a hammer blow” for those taking a prudent approach to their financial futures.
“It penalises saving when it has never been more important to do so and as it increasingly becomes a personal responsibility,” he continued. “We’re all living longer, meaning savings need to last longer, debt levels are high, care and health costs are climbing, and there’s a considerable reduction in the generosity of both state and private pensions. Given these factors, and the consequences for the country and for families of an increasingly older population with few financial resources, it seems madness to discourage savings in any way. Indeed, we need to do everything we can to revitalise a strong, long-term savings culture.”