The UK government plans to introduce a flat-rate tax of 33 per cent. Experts expect the tax to reduce higher-rate and additional-rate tax relief. Most basic-relief taxpayers would benefit from the move.
Basic-rate taxpayers are paying about 20 per cent tax whenever they contribute for their pensions. High-rate taxpayers are still paying about 40 per cent and additional-rate payers are paying at 45 per cent.
Another scenario would be equalising the basic 20 per cent rate. A higher-rate taxpayer who contributes 4.5 per cent growth rate and contributions would have £230,000 after two decades. A falling relief of 20 per cent would mean a £58,000 reduction to the total relief amounts.
The government is to make a decision during the next budget by March 16.
Experts advise savers to do the following to save more on pension tax relief:
Company schemes use the automatic enrolment programme that would give employees a basic scheme. Some companies match contributions at a higher level, which allows them to save enough.
Tax relief for workplace schemes usually requires less legwork and no extra admin needs. Most of the employees paying basic-rate tax on pensions have added relief immediately.
Most self invested personal pension would help you find the funds that have the potential and possibly go beyond what company schemes can offer. While you might have an annual charge as a levy, you can still see ongoing changes for your invested funds.
The FTSE 100 index was shot out of the sky with a four-year low equivalent to losing more than 200 points during the opening of the stock market Thursday. Due to low oil prices and Iran’s re-entry of surplus oil, the markets began to shift to lower ground, according to analysts.
About £160 billion was lost from blue-chip shares.
With the ongoing stock market breakdown, millions of UK workers saw their pensions reduced in value as hundreds of UK companies lost an estimated £52 billion collectively from their shares.
Work and Pensions Minister Ros Altmann called on investors to calm down. She also said that workers should understand pensions are a long-term investment and will move as the markets go up or down.
The bad news on pensions was amplified by the revelation of exit fees, which the Chancellor George Osborne pointed out as unfair charges on behalf of pension service providers. While Osborne had made moves to decrease excessive exit fees or banish them altogether, some 500,000 pension holders will still face fees until the FCA makes a final decision on the maximum amount for pension exit fees.
CMC Markets Chief Market Analyst Michael Hewson said:
“Few stocks were spared as European equity markets plunged sharply, with the FTSE 100 hitting levels last seen in November 2012 and tipping into bear market territory.
“Since the beginning of this year equity markets have not only spun their wheels, they have lost any semblance of positive traction as continued concerns of oversupply in the oil and gas markets set against a backdrop of slowing global growth have seen stock markets across the globe slip back into bear market territory.”