Pensions and the budget.

[Ozzie Osmond]

Last year George Osborne announced a further cut in the pensions Lifetime Allowance taking effect from 5 April 2013.

It was previously £1.8m, then £1.5m and will reduce to £1.25m. This is roughly eqivalent to a maximum pension of £50,000 p.a. obtainable with full tax relief on contributions.

Depending on how much you earn, the government is currently contributing 50%, 40% or 20% towards your pension. The higher your earnings, the more help you get from the government.

Can this survive the Chancellor's Budget on 21 March?

[Ozzie Osmond]

FiF said:

Call Me Dave has a death wish.

I think you're onto something there!

[Ozzie Osmond]

REALIST123 said:

The government doesn't contribute anything to pensions. At all. At best tax is delayed and then any remaining fund is stolen by the Government on death.

I take it you have no pension provision then? Well guess what.

Assume for the sake of argument someone earning £50,000 a year.

• Gets 40% tax relief on pension contributions. Every £600 he puts in is matched by £400 from the government.
• Investment returns are not taxed and money grosses up tax free within the pension plan.
• Retires at 60 and draws out 25% of the pension plan value completely free of all tax.
• Draws pension of, say, £20,000 a year which is only taxed at 20% (compared with 40% relief on the contributions paid in - so that's a straight profit of the 20%)

People who say it's not worth doing a pension are nuts.

PS If you don't have a pension I hope you're not ignoring ISA as well.