The U.K. Treasury confirmed that over 100,000 people will be affected by the new pension contribution limits. This will represent a savings of £4 billion to the government. The changes are anticipated to take effect on April 01, 2012 and will have many people seeing red when it comes to their personal finance situation.
Included in the changes is a lowered limit on the non-taxable portion of pension savings. The amount a person can save on an annual basis will be decreased from £255,000 to £50,000. Any additional savings will be taxed and the maximum pension size before high tax rates apply is being reduced to £1.5 million from £1.8million.
According to the Treasury, the new annual contribution amount will affect 100,000 people. The Treasury estimates that approximately 40,000 people have pension balances valued at more than £1.5 million. After considering some overlap, the Treasury estimates that fewer than 140,000 people will be affected. Pensions experts report that despite the changes, pensions are one of the most effective methods of saving that a person can have.
Individuals who are members of a defined contribution plan and receive a raise can see the increased value on their annual pension statements. Those who participate in savings plans that are more generous face a calculation that multiplies the increase in the accrued pension by 16, a change from the previous multiplier of ten. This limits the amount of tax-free annual pension increase.
Legal experts say that making use of the available allowances provides individuals with a safety net so they will rely less on the state when they reach retirement. The Treasury stated that the allowance reductions will provide revenue to restrict tax relief, which should help address record amounts of borrowing. The Treasury intended for the changes to target individuals who make the most significant contributions to their pensions.
One Party wanted there to be a vote on it, it was refused. They're making decisions while continuous polls are showing that no, this is not building our confidence in the economy at all. I'm getting out as soon as my degree is done. I'm sick, physically, worrying about how I'm going to get through Uni. Raising Uni fees, accomodation fees, taxes and cutting wages? It doesn't make sense.. they aren't looking long term at all. This is like planting a flower in a pot then leaving it in a dark, cold room with no sunlight or water. It won't grow and the economy wont either without the means to do so.