Chancellor Cuts Pension Tax Relief

Chancellor George Osborne reveals a cut to the annual tax-free allowance for pensions but raises the ISA contribution limit

Alanna Petroff 5 December, 2012 | 2:40PM

In his Autumn Statement, Chancellor George Osborne revealed the government's plans to restrict pension tax relief in the coming years.

Osborne announced a cut to the annual tax-free allowance on pension contributions from £50,000 to £40,000. He also announced plans to restrict the lifetime tax-free allowance for pension savings from £1.5 million to £1.25 million. These changes will go into effect starting in April 2014.

It is feared that this change to the annual tax-free allowance will deter people from saving for retirement, however, the change will only affect the small number of people who will have enough money to contribute more than £40,000 in a single year into their pension.

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About Author

Alanna Petroff

Alanna Petroff  is a financial journalist with Morningstar UK.

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