Pension Contributions for higher earners

One of the Conservative’s election pledges was to increase the individual IHT threshold to include property and ‘take the family home out of Inheritance Tax’, subject to certain limits.
Their plan was to fund this by limiting the amount pension tax relief available to high earners.

They proposed that the annual allowance for pension contributions will be reduced on earnings between £150,000 and £210,000, with those earning £210,000 seeing their annual allowance cut from £40,000 to £10,000.
We don’t know if this will definitely happen and if it does happen, when.

However the Queen’s speech on the 27th May announced that measures will be brought forward to increase the provision of childcare and that this would be paid for by the ‘scaling back of tax relief on pension contributions. ‘
This could involve a greater reduction in pension tax relief than outlined before the election. For example it could involve the restriction of pension tax relief at the higher rate and it could be bought in quickly – e.g. from the date of the next budget on the 8th July.

Therefore, if a higher earner is considering making pension contributions, they should consider doing so sooner rather than later. (Please note that this note does not constitute advice).

Although pensions have been made much more potentiality attractive by the changes to pension regulations from the 6th April 2015, the Lifetime Allowance (the point at which a pension fund is subject to additional taxation when benefits are taken) has been reduced in recent years. Therefore, making large contributions might not be advisable where there is a risk that existing pension funds will grow to the level of the lifetime allowance.

If you would like to discuss the implications of this please feel free to contact Paul Greaves or Ken Hart or contact

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