Experts predict tax changes to pension allowances are to affect more than 200,000 people, double the amount estimated by the Treasury.
Last week the Treasury announced new plans to slash the tax relief on pensions for high earning individuals. They will be lowering the amount of money people can save for a pension, currently at £255,000, to just £50,000, with any savings exceeding that figure to face taxation. They will also slash the current maximum retirement pension pot to £1.5 million down from £1.8 million.
The cuts are a further effort to reduce the massive deficit that is looming over the UK, and the Government hopes to raise around £4 billion by scrapping the tax reliefs of about 100,000 people. Financial Secretary to the Treasury Mark Hoban said: “We have developed a solution that will help to tackle the deficit but not hit those on low and moderate incomes. 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.”
However, financial experts feel that the Government prediction is off and that over 200,000 taxpayers could end up affected by the change. Marc Hommel, of accountants PricewaterhouseCoopers, said: “As there is no current intention to increase the annual allowance from £50,000, many more people could be caught in future years particularly if inflation takes off and workers are given pay rises. In time, it will affect at least 200,000.”