Pension tax relief slashed as Government looks to save more money

It has been announced that the Government is to reduce the annual amount of pension tax-free income in order to save £4 billion a year, to reduce the spiralling budget deficit.

The tax-free amount is being slashed from £255,000 a year to £50,000 from April 2011.

High earners will continue to be paid tax relief on pension savings at the highest rate at which they pay income tax.

The Government said the changes would affect 100,000 pension savers a year - of which 80% had incomes of more than £100,000 a year.

Mark Hoban, financial secretary to the Treasury, comments: “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.”

The measures were greeted with caution by the CBI who said it was “not as bad as feared.”

The changes to pensions come just a week after the Government revealed that child benefit is to be scrapped for higher rate taxpayers from 2013.

Families earning over £44,000 will be affected by the move.

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