The ConDems have announced new limits on pension contributions a person can make in the UK this morning:
High earners will see the amount of money they can save into a pension drastically reduced next year, after the Treasury confirmed on Thursday a package of cuts to pension tax relief.
From next April, people will be able to save only £50,000 a year into a pension with tax relief, down from a current annual limit of £255,000.
The limit is higher than expected. Many pension consultants had predicted the government would set a cap of £40,000 a year. Its initial consultation this year suggested the cap would be between £30,000 and £45,000.
Higher-rate taxpayers will also be allowed to keep tax relief at their marginal rate on pension contributions up to the £50,000 limit. There had been fears the government would restrict tax relief to 20 per cent for everyone.
This is extremely welcome. It limits abuse of the 50% tax rate – and that is something I have called for. But note that they have not had the courage to carry through on their convictions and as a result a person on the 50% tax rate can still get tax relief worth £25,000 a year for their own savings to be used for their own personal gain. This is about UK national average income.
And rather oddly – that £25,000 is exactly the limit to the benefits that they have said they will pay to any family in the UK in the future.
So, in a time of national austerity subsidising the savings of the rich is apparently worth as much as supplying a whole family with their basis needs when they will have been made redundant through no fault of their own as a result of ConDem economic policy.
Where is the fairness in that?