2009 Budget Summary

The major news for pensions is the restriction of higher rate tax relief for those earning £150,000 or more a year, effective from 6 April 2011.

Measures to prevent increased funding before then, affectionately referred to as anti-forestalling, have also been introduced.

In this summary, we comment on the changes and the implications for pension saving.

The key points in summary

This is a brief overview of the issues affecting pensions. Click on the title of each section for more details and to find out what our view is for each one.

Income Tax Changes

Our pre-budget report 2008 summary included the changes in income tax levels that were being proposed for those earning over £150,000 and the changes in personal allowances for those earning over £100,000.

The Budget statement 2009 increases the highest rate of income tax to 50% and brings forward its implementation date. The personal allowance changes are amended and also brought forward.

Limiting Tax Relief For High Income Individuals

The 2009 Budget restricts tax relief on pension contributions for those earning £150,000 or more a year. Relief will be tapered away until those earning over £180,000 will receive relief at 20%, the same as for a basic rate taxpayer. This will be effective from 6 April 2011.

Anti-Forestalling

The 2009 Budget restricts tax relief on pension contributions for those earning £150,000 or more a year. This will be effective from 6 April 2011. Measures have also been brought in immediately to prevent individuals who could be affected from increasing their tax relievable pension contributions in the interim.

Pension Credit - Capital Disregard

The capital disregard in Pension Credit, and pensioner-related Housing and Council Tax Benefit, is to be increased from £6,000 to £10,000 in November 2009.

The information provided is based on our current understanding of the Budget 2009 and associated documents and may be subject to alteration as a result of changes in legislation or practice