The UK government is set to introduce changes to the UK pension fund system which could severely impact the value of final salary pension schemes in the UK. Only hours after BP chief executive Tony Hayward left the group with a rumoured £600,000 a year pension the government is set to reduce the maximum amount which can be sheltered in a pension scheme in any one year. Apparently the government is looking towards reducing the current £255,000 limit to around £40,000 which would obviously have a major impact upon those paying in to final salary pension schemes (the limit is actually the total contributions from employees and employers).

The previous Labour government had already introduced new proposals to reduce tax relief available on pension fund contributions to a maximum of £150,000 a year. While the proposals by the current UK government could also see tax relief on pension contributions reduced for high earners from 50% to 40%, it has received a cautious welcome from the National Association of Pension Funds which has been campaigning for simplification of the UK pension system.

While David Cameron and his coalition colleagues have attracted criticism and praise in equal measure since they took office, there is no doubt they have hit the ground running and taken a number of very difficult decisions at a very early stage.

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