Savers urged to undergo a pension review as the Treasury considers ways to claw back costs of the coronavirus pandemic

Pensions experts at a North Staffordshire firm are urging people with larger savings have their investment strategy reviewed as the Treasury considers changes to how funds are taxed.

Whitehall civil servants are understood to be considering changing the  tax regime for pensions as one way to help pay for heightened public sector spending during the Covid-19 pandemic.

One of the ideas being examined is reducing the pensions lifetime allowance from a little above £1 million to £800,000 or £900,000, lowering the point above which extra tax charges kick in. Another would see individuals contributing to pensions getting the same rate of tax relief, meaning higher-rate taxpayers lose out, while a third is new taxation on employer contributions.

Emily Small, a Director at Richard Jacobs Pensions and Trustee Services, based at Lymedale, Newcastle-under-Lyme, manages funds for many business owners and directors in Staffordshire.

“It is believed that Treasury officers want to rebalance public spending following the troubles of the past 18 months and that a pensions tax increase could help to achieve that.

“The Chancellor of the Exchequer has said that this should not be done by increasing income tax, National Insurance or VAT, so this means pensions are in the spotlight.

“Should the lifetime allowance change then those with larger pension pots or defined benefit pensions, for example, equal to £500,000, we would recommend a savings review.

”One idea being looked at would see the pensions lifetime allowance lowered. We would want to consider whether current contribution rates would push clients over the threshold in the future and whether action could be taken to ensure clients don’t lose out.

“A second idea would be a single rate of tax relief for pension contributions. Currently, higher-rate taxpayers who put money towards their pension each year, currently get a tax relief rate of 40 per cent, but lower earners who do the same get 20 per cent.

“It may be that higher rate taxpayers might opt to maximise their contributions now to offer protection longer-term.”

Emily, a Chartered Financial Planner, said where companies had done well during lockdown they may want to consider pension contributions, adding: “While the pandemic has hit some sectors hard, there are companies which have benefited in the past 18 months. Employer contributions to pensions can be increased to as high as £40,000 per annum, and as this is a tradable expense, some might want to consider making additional employer pension contributions.”

Richard Jacobs Pensions and Trustee Services Ltd was founded in 1992 by Richard Jacobs, a Chartered Financial Planner with industry experience dating back to 1973.

The firm works with many companies in Staffordshire and Cheshire on auto-enrolment and with personal clients, including many business owners.

To find out more about Richard Jacobs Pensions & Trustees Services Ltd please go online to www.jacobs-pensions.co.uk.

ENDS

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