| Those that fall into the higher earners bracket | | | | not wait. Chris Noon, partner at Hymans |
| have been warned that the government may | | | | Robertson, says that although he is not expecting |
| impose further restrictions to pension savings in | | | | the government to lower the contribution limits, |
| the emergency Budget on June 22. | | | | anyone who deems it a risk should top up their |
| Accountants and wealth advisers have reported a | | | | pensions as much as possible before the Budget, |
| surge in calls from clients that earn over | | | | as a safety measure. |
| £100,000 per year who are concerned that | | | | Since the beginning of the current tax year those |
| changes to pension tax relief might restrict how | | | | earning more than £150,000 have been advised |
| much they can save for retirement. | | | | to top up their pensions. |
| The rules that set the boundaries around how | | | | The highest income tax rate of 50% has already |
| much high earners can pay into a pension came | | | | come into effect, but restrictions on tax relief will |
| into force last year. The new restrictions state | | | | not be coming in until next year, so high earners |
| that anyone earning more than £130,000 is only | | | | have a one-year window in which they can pay |
| allowed to deposit up to £20,000 a year into a | | | | as much as possible into their pensions while |
| pension, with some exceptions. | | | | benefiting from a 50% tax relief – albeit with |
| The supposed "anti-forestalling measures" were | | | | the annual restriction of £20,000. |
| put into place to prevent the highest earners | | | | However, some consultants have warned that |
| from filling their pensions with large amounts of | | | | people could be caught out by the restrictions |
| cash before the higher-rate tax relief is restricted | | | | without even realising. Ray Pygott, partner at |
| next year. From April 2011, higher-rate relief will | | | | KPMG, said that anyone earning over £100,000 |
| be cut down from 40% to 20% for those | | | | should review their pension arrangements, as they |
| earning between £150,000 and £180,000. | | | | might be getting other sources of income such as |
| But accountants have highlighted that those | | | | annual bonuses or rental income. These extras |
| earning less than £150,000 could also see their | | | | could push them over the current limits, therefore |
| tax relief restricted. Before the election, the | | | | subjecting them to a different set of restrictions. |
| Liberal Democrats stated that they would cut | | | | It is feared that both the new restrictions and |
| higher-rate pension tax relief all together. The | | | | other tax charges that are being introduced, will |
| accountancy firm Grant Thornton, thinks it is | | | | put high earners off pensions altogether. |
| "likely" that the government will lower the | | | | "A lot of people will be disadvantaged by being in |
| threshold for higher-rate relief in June. | | | | pensions – I think we'll see high earners |
| But Mike Warburton, tax partner at Grant | | | | coming out of pensions altogether and looking at |
| Thornton, says this doesn't mean that higher | | | | alternatives," says Pygott. |
| earners should immediately pay more into their | | | | Companies are also looking to put alternative |
| pensions. | | | | schemes in place for their high earners. These |
| He does not expect the anti-forestalling measures | | | | schemes can include corporate individual savings |
| to be changed, which means that if any changes | | | | accounts (Isas) – where the company pays |
| are made, those earning below £130,000 should | | | | into an Isa on behalf of its employee – share |
| still have until next April to top up their pension. | | | | plan schemes and offshore savings schemes |
| However, a different view has been taken by | | | | known as employee-funded retirement benefit |
| others, who say that cautious investors should | | | | schemes (Efrbs). |