Could George Osborne scrap higher rate tax relief on pensions?

Simonne updates us on pension changes that could be coming our way:

Yesterday’s Telegraph reported that George Osborne is in talks to discuss scrapping higher rate tax relief on pension contributions.

This means that if you’re in the higher rate tax bracket (earning over £43,875) you would only get back 20p for every £1 paid into a pension, and not 40p if you’re a 40% taxpayer or 50p if you’re a 50% taxpayer (with pre-tax earnings above £150,000).

In April this year, the government cut the amount you can save into a pension each year from £255,000 to £50,000. Scrapping higher rate tax relief would apparently save the government a further £7bn a year, helping towards funding the deficit, or boosting the state pension by up to 50%.

So, should we be taking this seriously? 

It’s certainly not the first time this option has been considered. 

If you would be affected by such a change, you could think about paying more into your pension now before the rules change. Only do this if you can afford to and if you’re happy tying up the money.

Meanwhile, the government is being urged to rethink its plans to increase the state pension age for women to 66. 

A debate is taking place today on the pensions bill.

The time scale for raising women’s state pension age in line with men’s has already accelerated – it’s now due to rise to 65 by 2018 (2 years earlier than originally planned). 

Women born between March 6th and April 5th 1954 will be the worst affected. 

But now plans are afoot to raise women’s state retirement age to 66 from 2020. 

This doesn’t allow women anywhere near enough time to plan for a later retirement age. As you can imagine, there have been major uproars about this and it is being debated today. We’ll find out later on if the vote gets passed by the House of Commons.

You can read the Telegraph’s full report on this here.

Thanks Simonne for keeping us up-to-date with the changes and living up to your name (Wise Monkey)! 

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