Retirement Planning for High Earners

publication date: Apr 27, 2010
author/source: Guest article by St. James Place Wealth Management

Retirement Planning for High Earners

Although everyone is eagerly waiting for the current budget this week, many people have missed the fact that in one of the last budgets on 22nd April 2009, Alistair Darling announced that:-

  • The Government intends from 6th April 2011 to restrict tax relief for individuals with an annual income of £150,000 or more.
  • Relief will be tapered away so that for those earning over £180,000 relief will be worth 20 per cent, the same as a basic rate taxpayer.

In anticipation of the new regime that will apply from 6th April 2011, the Government introduced new rules (the ‘anti-forestalling rules’) that restricted the higher rate tax relief on high earners to prevent them from taking the opportunity to increase their pension contributions in anticipation of the 2011 changes.  Originally the anti-forestalling rules only applied to individuals with income of £150,000 or more, but this was reduced down to those earning £130,000 in the Pre-Budget Report on 9th December 2009.

The new rules are summarised by St. James’s Place as follows:-

  • Higher rate tax relief remains on pension contributions for anyone with relevant income of less than £130,000.
  • Individuals with relevant income of £130,000 or more will continue to receive higher rate tax relief on monthly (or quarterly) contributions that were already in place on 9th December 2009.
  • Individuals with relevant income of £130,000 or more who have not made any pension provision will continue to receive higher rate tax relief on contributions of up to £20,000pa.
  • Individuals with relevant income of £130,000 or more will receive higher rate tax relief on the average of annual or recurrent single contributions over the tax years 2006/07, 2007/08 and 2008/09 up to £30,000.

It’s essential if you are in this high earning bracket to seek professional advice to make sure you understand the implications of the new rules on your pension planning for the future.

St. James’s Place have also kindly given a PDF with case studies, free of charge, for you to download. If you have any queries about your pension plans, please contact:-

Andrew Chatterton
Senior Partner
Franklyn Financial Management
St. James's House
4 John Bradshaw Court
Alexandria Way
CW12 4AP

Tel: 01260291825


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