More pension pain
The pensions anti-forestalling legislation, that acts to limit high rate
pension relief from 2011 onwards, will now apply to those with 'relevant
incomes' of £130,000 or more (previously £150,000).
Pension contributions will retain full tax relief up to the higher of:
- Normal ongoing pension contributions (NORPS); or
- The lower of £30k and average contributions over the past three years if contributions are less regular than quarterly; or
- £20k
The anti-forestalling measures prevent taxpayers establishing a history of NORPs after April 2009.
The existing rules are complex, to say the least. The new rules merely add to this complexity. The increased administration burden for companies is high, particularly given the need for companies to understand aspects of their employees' personal financial affairs. It is doubtful that the level of tax at stake justify the added complexity.
Further, the restriction of higher rate tax relief itself from 2011, which affects individuals with a 'gross income' of £150,000 or over who save in a registered pension scheme, has also been extended. 'Gross income' already included the value of the individual's pension contributions, but now also includes any pension benefit funded by the employer on their behalf. Calculating the value of employers' contributions to a defined benefits is not an easy task (although the restrictions are relaxed for those earning below £130k which is welcome).
Coming on top of the wholesale reform of pensions which took effect in April 2006, and the changes introduced last year, our pension legislation must be the most complex and hardest to explain in the world. The consultation document on the legislation to take effect from April 2011 is over 120 pages (although in pension terms this might be regarded as a brief document).
