Beat the pension squeeze

13 January 2013

 

MIDDLE-CLASS workers could be thousands of pounds worse off in retirement following moves by the chancellor to scale back the benefits of saving into a pension.

In the autumn statement last week, George Osborne announced a 20% cut in the maximum annual allowance for pension contributions, from £50,000 to £40,000, and reduced the lifetime allowance from £1.5m to £1.25m. The changes come into effect in 2014.

Osborne argued that only a small proportion would suffer because 99% of pension savers make annual contributions of less than £40,000 and 98% of those approaching retirement have pots under £1.25m.

“I know these tax measures will not be welcomed by all . . . but we must show we’re all in this together,” he said. “When you’re looking for savings, it’s fair to look at the tax relief we give to the top 2%.”