Budget 2009: Rich lose pension tax relief
By politics.co.uk staff
Those earning over £150,000 will lose tax relief on their pensions, the chancellor has revealed.
The removal of tax relief was widely expected but for all high rate tax payers, not just those taking in more than £150,000.
“I intend to address the anomaly which sees a tiny proportion at the top taking a large slice of the help we give people to save,” the chancellor told the House of Commons.
“It is difficult to justify how a quarter of all the money the country spends on pensions tax relief goes, as now, to the top 1.5 per cent of pension savers.”
The policy is not entirelyt dissimilar to a Liberal Democrat proposal which would have seen a restriction on tax relief on pension contributions to the basic rate.
The basic rate of the state pension will continue to rise at 2.5 per cent regardless of the rate of inflation.
The winter fuel allowance will also be maintained at a higher rate for another year which keeps the level at £250 for over-60s and £400 for over-80s.
In addition, grandparents of working age who spend time looking after their grandchildren will have that time added to the calculation of their state pension.
This year will also see the amount which can be added to a tax-free ISA raised to £10,000 per year for the over-50s with the scheme expected to be extended to everyone else by next year.
There will be a rise from November in the amount pensions can have in savings before their pensions credits are reduced.
They will now be able to have £10,000, up from £6,000, to help those hit by low interest rates in a move the chancellor said could mean an average of £4 extra per week.
