2010 Budget: pension changes
The following are the key announcements regarding changes affecting pensions.
Pensions – Lifetime and Annual Allowances
The Registered Pensions Scheme 2010-11 Lifetime Allowance of £1.8 million and Annual Allowance of £255,000 will continue to apply at these levels for a further 5 tax years, ie up to and including the tax year 2015-16.
Pensions – Changes to Pensions Taxation
The pensions tax rules will be amended in respect of the registration of the National Employment Savings Trust, other provisions in Pensions Act 2008 and the unauthorised borrowing tax charge.
Pensions – Trivial commutation rules
The Government remains open to proposals for further simplification of the rules governing the commutation of small pension pots provided the simplification would not:
- increase Exchequer costs
- add significant costs for HMRC
- would not be open to manipulation
In particular the Government is interested in proposals about:
- extending rights to commute personal pension funds worth up to £2,000
- allowing couples to pool small pension pots in order to achieve better value by buying a joint life annuity
Implementation of the restriction of pensions tax relief
The Government announced at Budget 2009 its intention to restrict tax relief on pensions savings with effect from 6 April 2011 for high income individuals. The measure will recover tax relief above the basic rate on pension contributions made by or on behalf of individuals with high income.
For people with income of £150,000 or over but below £180,000, tax relief on pension contributions (including the value of employer contributions for those in employment) will reduce gradually from marginal rate to basic rate as income increases. Where income is £180,000 or over, tax relief on pension contributions will be restricted to basic rate.
A consultation document, “Implementing the restriction of pensions tax relief”, including a consultation stage impact assessment, on the implementation of the restriction of pensions tax relief was published at the 2009 Pre-Budget Report 2009. At Budget the Government published a final impact assessment and a summary of consultation responses.