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| Version 4 | Version 5 |
|---|---|
| Tax relief on pensions is reduced | Tax relief on pensions is reduced |
| (40 minutes later) | |
| The amount of tax-free income that savers can put into pensions has been sharply restricted by the government. | The amount of tax-free income that savers can put into pensions has been sharply restricted by the government. |
| The annual limit will be reduced from £255,000 to £50,000 in April. | The annual limit will be reduced from £255,000 to £50,000 in April. |
| Experts say that many people with long service in final-salary pension schemes could face unexpected tax bills as a result of modest pay rises. | Experts say that many people with long service in final-salary pension schemes could face unexpected tax bills as a result of modest pay rises. |
| The Treasury hopes the changes will eventually save it more than £4bn a year - which could be used to reduce the budget deficit. | The Treasury hopes the changes will eventually save it more than £4bn a year - which could be used to reduce the budget deficit. |
| The lifetime allowance on money that can be built up in a pension fund and receive tax relief has also fallen from £1.8m to £1.5m from April 2012. | The lifetime allowance on money that can be built up in a pension fund and receive tax relief has also fallen from £1.8m to £1.5m from April 2012. |
| High earners will continue to be paid tax relief on pension savings at the highest rate at which they pay income tax. | High earners will continue to be paid tax relief on pension savings at the highest rate at which they pay income tax. |
| The coalition government began a consultation after the Labour government announced plans to gradually reduce the tax relief available on pension contributions for people earning more than £150,000 to just 20%, despite the fact that these people pay income tax of 50%. | The coalition government began a consultation after the Labour government announced plans to gradually reduce the tax relief available on pension contributions for people earning more than £150,000 to just 20%, despite the fact that these people pay income tax of 50%. |
| Numbers | Numbers |
| The government said that changing the allowance to £50,000 would affect 100,000 pension savers, and 80% of those had incomes of more than £100,000 a year. | The government said that changing the allowance to £50,000 would affect 100,000 pension savers, and 80% of those had incomes of more than £100,000 a year. |
| Someone who puts more than £50,000 into a pension in one year will also be able to offset this against their allowance from previous three years. | |
| However, the rate at which increases to the pensions accrued in defined benefit schemes will be valued is also to be put up, meaning some workers, particularly high earners who receive significant salary increases, may face tax charges. | |
| "We have abandoned the previous government's complex proposals and developed a solution that will help to tackle the deficit but not hit those on low and moderate incomes," said Mark Hoban, financial secretary to the Treasury. | "We have abandoned the previous government's complex proposals and developed a solution that will help to tackle the deficit but not hit those on low and moderate incomes," said Mark Hoban, financial secretary to the Treasury. |
| "We have taken a tough but fair decision. | "We have taken a tough but fair decision. |
| "The coalition government believes that our system is fair, will preserve incentives to save and - compared to the last government's approach - will help UK businesses to attract and retain talent." | "The coalition government believes that our system is fair, will preserve incentives to save and - compared to the last government's approach - will help UK businesses to attract and retain talent." |
| John Cridland, deputy director general of the CBI, said: "The announcement is not as bad as feared. The government had considered making the annual allowance as low as £30,000. | John Cridland, deputy director general of the CBI, said: "The announcement is not as bad as feared. The government had considered making the annual allowance as low as £30,000. |
| "It is important now that the government appreciates the short timescale for implementation and works with companies to provide clarity." | "It is important now that the government appreciates the short timescale for implementation and works with companies to provide clarity." |
| George Bull, head of tax at Baker Tilly, said: "Once the new limit is in force, we urge the government to refrain from future tinkering in order that people can have confidence about their own pension planning." |