The Chancellor gave his Budget for 2010 on 24 March.
The main points in respect of pensions changes are set out briefly below.
- Lifetime and annual allowances frozen - The Registered Pensions Scheme 2010/11 Lifetime Allowance of £1.8 million and the Annual Allowance of £255,000 will continue to apply at these levels for the next five years, up to and including the tax year 2015/16. These provisions will take effect on 6 April 2011.
- Tax relief restrictions on pension contributions to remain - The restrictions on pension contributions for high earners announced in the April 2009 Budget, and expanded in the December 2009 Pre-Budget Report, will remain in their current form.
This means that, with effect from 6 April 2011, tax relief for pension contributions made by high income individuals will be restricted. An individual will be classed as “high income” if his gross income, including his own pension contributions and any charitable donations he makes, is £130,000 or more and his gross income is £150,000 or above when employer pension contributions are included.
- Personal Accounts (NEST) schemes - The pensions tax rules will be amended in respect of the registration of the National Employment Savings Trust (NEST), other provisions in the Pensions Act 2008 and the unauthorised borrowing tax charge. These amendments will allow NEST to register with HMRC for tax purposes and to be subject to the same rules as other registered pension schemes.
Provisions will also be made to:
- remove the tax liability on any interest charges on late pension contributions made by an employer to qualifying pension schemes
- provide power to make regulations to deal with any unintended tax consequences that may emerge as a result of the implementation of NEST and the employer duties set out under the Pensions Act 2008
- remove the tax charge on borrowing linked to the cost of establishing and operating a registered pension scheme, subject to conditions.
These measures will come into effect under a future Finance Bill to be introduced in the next Parliament.