Pension tax relief limit scrapped

The Government has abandoned plans to limit the amount of tax relief on pensions.

People earning over £150,000 would have been affected by Labour's plans to reduce the amount of tax relief high-end earners qualified for from April next year.

But the plans have been scrapped as Chancellor George Osborne says that the Government is trying to find other ways to save money for high earners making pension contributions.

He said that one possibility was reducing the amount they can pay into a pension annually.

It is thought that reducing the current annual allowance of £255,000 to between £30,000 to £45,000 would produce a similar saving for the Treasury as the £3.5 billion that would be saved through reducing pensions tax relief for people earning more than £150,000. It would also be much simpler to administer.

Joanne Segars, chief executive of the National Association of Pension Funds, said: "We are pleased the Chancellor has listened to our argument for a much simpler and more radical solution.

"The previous government's proposals were a disaster in the making. They would have been very damaging to the pensions of all working people, not just the well-off.

"Reducing the amount that can be paid into a pension tax-free each year will protect the Treasury's tax take, but will be much more supportive to pensions saving and less costly to implement."

Copyright Press Association 2010