Pensions, savings and investments

High earners were also shocked to hear that not only would tax relief for pensions be restricted from 2011, but that the Government also intends to restrict their ability to contribute this year and next, in the run up to the new rules.

The restriction, however, is much more limiting than was expected, as it is intended to prevent those affected from increasing their pension contributions in 2009/10 and 2010/11.

But the effect of the rules as drafted mean that many taxpayers earning over £150,000 per annum could be forced to reduce their pension contributions this year.

Pension industry groups are warning that government plans to cut the tax relief available to higher earners on their pension contributions could have an adverse impact on the whole savings and retirement system.

Changes to pensions tax relief for higher earners could be counterproductive, it has been claimed.

Savers might have to be willing to tie their money into long term deals in order to enjoy reasonable returns on their investments.

Reforms to the pension system, planned for 2012, run the risk of adversely affecting the flexibility of the UK’s labour market, it has been argued.

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