Show Hide image

Tax relief on pensions to be restricted

The cap on pension relief will be lowered from £255,000 to £50,000.

The annual tax relief limit on the amount of income that workers can put in pensions will be restricted at less than a fifth of its current level.

The Treasury is expected to announce a lowering of the cap from £255,000 to £50,000, as part of changes which it hopes will eventually save the government more than £4bn a year.

The changes will also see a reduction from £1.8m to £1.5m in the lifetime allowance on money that can be saved up in a pension fund and receive tax relief.

However, it is expected that the move will allow high earners to continue to benefit from tax relief on pension savings at the highest rate at which they pay income tax.

Citing experts, the BBC notes that the Treasury plan could result in unexpected tax bills for people with long service in final-salary pension schemes due to even a modest increase in pay.