Government to reduce pension fund relief

The UK government has today announced plans to reduce pension fund tax relief which will have a major impact upon those looking to save for their future. Currently relief is available, at the rate at which individuals pay income tax, on pension fund contributions of up to £255,000 a year. However, the UK government is looking to reduce this level to between £30,000 and £50,000 something which would hit around 500,000 people in the UK.

The government is also looking to reduce or even scrap a further scheme which allows people to invest more into their pension schemes in their final year of employment. The move has been criticised across the board because ultimately any pension fund income reductions will at some point lead to more pressure on the UK benefit system. This comes after a prolonged period during which former governments have encouraged individuals to save for the future and indeed in many cases increased the tax relief available.

Initial estimates suggest that the proposed changes in the pension tax relief system could save the UK government around £8 billion over the next three years as we await further news on proposed government budget cuts.