The government has brought back plans to cut pension tax relief for people who release some of their pension and leave the rest in their pension scheme. The cut will affect people who are over 55, reducing the amount they can save without being taxed from £10,000 per year to £4,000. Critics are saying that it is unfair on people who want to release some cash from their pension, but also keep on working and saving.
ThisIsMoney reports –
“Over-55s who dip into their pension pots are now only able to put away £4,000 a year and still automatically qualify for tax relief, rather than £10,000. A cut to the tax-free dividend allowance from £5,000 to £2,000 scheduled for April 2018 is also back on track after the Government announced plans to reintroduce the delayed Finance Bill later this year. Thousands of investors and older workers still saving for retirement were given a last-minute reprieve from the controversial plans on dividends and pension recycling before the election… Yet this created confusion for pension savers as the cut in the ‘money purchase annual allowance’ from £10,000 to £4,000 had already effectively arrived on 6 April… The Government has now settled the matter by saying policies originally announced to start from April 2017 will be effective from that date. Therefore, anyone who withdrew more than £4,000 from a pension after that date or does so from now on is affected by the new limit.”