The annual allowance on pension tax relief is expected to be cut in Budget 2018, according to predictions from Royal London.
In a recent speech, Chancellor Philip Hammond said the cost of pension tax relief is “eye-wateringly expensive”, adding to speculation that it will be targeted in the Budget.
In response to the comments, Royal London suggests the Government’s most likely route is to reduce the annual allowance for tax relief on pension savings.
Currently, the annual allowance stands at £40,000, but the mutual insurer says this could be cut to £35,000 or £30,000.
This could “leave more than 100,000 higher earners out of pocket by up to £4,000 each”, Royal London warned.
Aegon also commented on a potential cut to the annual allowance, saying any changes could “create uncertainty” and put people off pension saving.
Kate Smith, head of pensions at Aegon, said:
“The Government should be thinking long term and have joined-up policies working across the board.
“Ultimately any changes made now are set to impact a generation of pension savers, many of whom are only just beginning to save into a pension as a result of auto-enrolment.”
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