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New proposal might result in smaller retirement pots.
In his summer budget the chancellor suggested that pensions could be “taxed like ISAs”. The effect would be that taxed income could be put into retirement savings but that funds would not be taxed when they are taken out.
Andy James head of retirement planning at Towry suggested that the new proposal might result in much smaller retirement pots.
By way of illustration he cited a 40-year old earning £50 000 a year who puts 5% net (£2 500) of their wages into a pension fund. Currently as a higher rate taxpayer benefiting from 40% pensions tax relief the contributions are worth £4 167 and by 65 would yield a pension fund of £208 822.
Were the government to adopt the proposal allowing only income...
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