The discarding of proposed amendments to the Finance Bill is a disappointment and means the new rules are a violation of the 2006 Simplifications of Pensions promises, says Dentons.

A debate held yesterday (18 June 2009) in Parliament on the Public Bill Committee's proposed changes to the Finance Bill saw no change at the Bill's Committee stage to the new rules introduced by the Budget 2009 for high earners and higher rate tax relief.

The rules, which would see those earning over £150,000 with a limit to their pension contributions of up to £20,000 per year, will mean contributions above that allowance would be taxed at 20 per cent.

The proposals debated at Parliament were to raise the special annual allowance from £20,000 to £50,000, and to disregard retrospective analysis of earnings - the current proposals will look at the last two tax years to see if income exceeded £150,000. The amendments, had they been carried, would mean only earnings in the current year were looked at. The final proposed amendment would mean that regular contributions established before 22 April 2009 would be protected from the new rules, and would have allowed annual contributions to be counted.

"It's very disappointing that these amendments were not carried," explained Martin Tilley, business development manager at Dentons. "They were certainly a step in the right direction, offering a larger allowance and fewer restrictions. We still believe the proposals were ill thought-out and have broken the pension promises made by the Simplification of Pensions in 2006.

"While the proposals are directly aimed at the UK's 230,000 highest earners, their impact is likely to be felt by more modest earners in the medium term. The Budget changes are sending out completely the wrong messages on pension saving."

Earlier in the week, the National Association of Pension Funds (NAPF) expressed their concerns that the rules could be extended to medium earners in the long run.

- Pensions Age June 2009

Share Story: