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IF you are a UK worker earning more than £100,000 it may be worth dragging your eyes away from the sports or fashion pages for ten minutes to think about your pension contributions.

The Budget in April reduced the tax relief available on pensions to those earning over £150,000 from 2011. The UK tax authorities have put in place measures to avoid people chucking loads of money into their pensions in the meantime in order to get round the change.

But the graduated removal of personal allowances for those with annual income of more than £100,000, also announced at the Budget, means that from April 2010, people just into the six figure income bracket could effectively gain more than 40% tax relief on additional pension contributions.

Employees with total income up to £150,000, and in particular those with income between around £100,000 and £113,000 could be better off by increasing their pension contributions from next tax year, if this would bring their taxable income down to £100,000 or less.

Watson Wyatt say that pension planning for high earners is going to be “very messy over the next couple of years”. 

Given that nobody you speak to nowadays seems to understand a damn thing about pensions and ever fewer people (if that’s possible) seem to trust pensions as a "safe" way of providing for their retirement, it’s quite an achievement to have made things even messier. 

Well done the politicians. 


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