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We are officially delighted

Fiona Tait on the recent Budget.

We are officially delighted

Itís a social network faux-pas to use ďdelightedĒ in any commentary so I did think twice before using it. The fact remains though that I am delighted that the Chancellor chose to leave pension tax relief untouched in his 2012 Budget.

A period of stability

Itís not just my commercial head that welcomes this decision, I genuinely believe it is better for retirement savings that the rules are left unchanged for a while. When the coalition government came into power they insitgated a number of changes, most of which were designed to create more flexibility and simplicity for retirement savers.

This resulted in changes not only to the amount people could save in a pension, but also how and when they could take their benefits. This is a lot to take in, even for full-time pension geeks. And although I make a living out explaining the never-ending procession of rule changes I would infinitely prefer it if pensions were easy enough for eveyone to understand and appreciate. I am sure that if I need to I can find something else equally geeky to talk about.

A proper incentive

The introduction of automatic enrolment is a matter of months away. Thousands of employees will find themselves in a pension plan whether they want to be there or not. They do however have the option to opt out again and for some it wonít take much to push them into that decision.

Pensions need to be viewed positively so that those who could benefit make the right decisions. Being able to benefit from tax relief on pension contributions is not a deal-breaker for many individuals, but removing it could be, because it creates another potential excuse to avoid pension planning. And heaven knows we donít need any more of those.

Change, however well intentioned, leads to insecurity. If the powers that be keep fiddling with pensions it could lead people to believe they donít believe in them.

An opportunity

Of course in change there is opportunity, and so not withstanding the comments above I would always advocate making the most of it when it occurs. The Chancellor also confirmed the top rate of income tax will reduce from 50% to 45% from April 2013. Those who are paying this rate will no doubt be disappointed at the delay, however it does present an opportunity for pension planning.

Any contributions made prior to the introduction of the reduced rate could still attract tax relief at 50% for those who qualify. And if the contribution is over £50,000, individuals can make use of the carry forward provisions introduced last year to mop up any unused annual allowance from the last 3 tax years.

Geeky or not, go for it!!



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About the author

Fiona Tait

Fiona Tait

Business Development Manager

Fiona joined the life and pensions industry in 1989. She is a Fellow of the Personal Finance Society, an Associate of the Chartered Insurance Institute and is currently serving as President of The Insurance Society of Edinburgh. Fiona specialises in the areas of at retirement planning and pensions and divorce.

Stay up to date with Fiona (@RetirementView) on Twitter.

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The views in this blog are the opinion of the author. They are based on their interpretation of industry developments and current understanding of UK proposed and actual legislation, and should not be interpreted as recommendations or advice.

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