Savings by the self-employed are always lower than by those who are in employment and with restrictions on the annual savings amount, it is hard for them to catch up.
It is quite surprising that the tapered annual allowance hasn’t been done away with alongside the other changes announced today but the above changes have been factored into the taper, now tapering down to £10,000 and not the previous £4,000.
We assume that this will mean that full taper doesn’t apply until an adjusted income of over £360,000 as the taper now starts at an adjusted income of £260,000 and not £240,000.
By not scrapping this we still have the situation where many can’t determine the amount they could save into their pension until it is too late to do so, because it is determined by total taxable income in the tax year in which the contribution is made.
That being said, the increases mean less people will be subject to the taper in the first place.
In conclusion, these changes may seem simple in nature, but the difference this can make to a client may be significant.
The more detail we get to see, may mean there are other opportunities for pension saving. A little simplification will hopefully go a long way.
Claire Trott is divisional director of retirement and holistic planning at St. James’s Place
