Pensions, savings and investments

Cash ISAs that were offering savers attractive returns just a few weeks ago are now being pegged back to lower interest rates.

The CBI has urged a change to the pension system in order to allow businesses extra breathing space in which to make good the shortfalls in their final salary schemes.

Changes to the rules next year will affect early access to pensions.

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.

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