The latest round of pension reforms in Britain will reduce the amount of tax relief allowed on pension contributions for high income earners.
The amount people can pay tax-free into a pension will plunge from £255,000 to £50,000 in April 2011. The total amount that can be contributed tax-free over a lifetime will drop from £1.8 million to £1.5 million by April 2012, as reported by was reported by AFP.
About 100,000 people will be affected by the reforms, and 80% of those are high earners with salaries more than £100,000. Announced by the Treasury, the reforms aim to reduce public debt. The government hopes to save more than £ 4 billion a year.
Initially, the government had considered setting the annual tax-free limit as low as £30,000, said John Cridland, deputy director general of the Confederation of British Industry.
Andrew Cawley, head of pensions at KPMG in the U.K., added the new tax rules should have many in the middle class breathing a sigh of relief. “Government has developed an approach which is much fairer and sustainable than the original proposals were — critically it will help lower- and middle-earners maintain pension savings,” he said.