ELECTION: SHOULD YOU ACT BEFORE TAX RELIEF CUTS?
As part of the electioneering in the run up to the May 7 vote, all the main political parties have pledged to cut the valuable tax breaks available on pension contributions.
Pension savers are currently entitled to tax relief on their contributions which is paid at their highest rate of income tax – 40 or 45 per cent for most senior doctors.
Labour plans to limit tax relief for top-rate taxpayers to just 20 per cent – the same level as basic-rate payers for those with incomes above£150,000. Pensions minister and Liberal Democrat Steve Webb has long championed a flat rate of tax relief on pensions of around 30 per cent.
The Conservatives have pledged to gradually reduce the amount which can be saved into a pension per year. Independent practitioners earning over £150,000 per year would see their annual allowance cut from £40,000, reaching a low of just £10,000 for those earning £210,000.
It is disappointing that following the good news of pensions freedoms, politicians have decided to once again raid retirement savings when savers would benefit from a period of stability.
Many senior doctors should urgently review their own pensions’ savings. It is very important to be mindful of annual and lifetime allowances – there may be options to limit any additional tax payable.