Bad news on pension contributions
The news on pension contributions just seems to get worse. We already have a 20% tax charge on ‘irregular’ contributions above a £20,000 annual allowance for individuals earning over £150,000 (to prevent them topping up their pensions before the new rules come totally into force in 2011).
However, it now transpires that individuals who change pension providers (almost certainly those who change employers) will have their contribution history wiped out. As a result they will face the full 20% tax on all their contributions over £20,000, even if they have a history of paying regular contributions of well above that amount.
I know it is legal – but is it fair?
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Cathy Corns is a Tax partner at Mercer & Hole.
And the really bad news for those who are being made redundant is that they can be treated as "individuals earning over £150k" as a result of their redundancy payment taking them above this threshold.
In my case my salary is less than half the £150k allowance but, because I have a "generous" redundancy payment (the consequence of 27 years service) I am caught by this provision, this surely cannot be the intention (although HMRC confirm it is the reality)!
Steve
I agree this seems unfair but sadly there seems little chance of the rules being relaxed
Regards
Cathy