Where next for the hard-pressed pension investor?

The latest budget sees another attack on the pension savers of middle England by dint of yet a further reduction in the lifetime allowance. On top of this, pension tax relief is also very much in the firing line. Different and radical proposals are emerging from each of the major political parties in the run-up to the election.

Clearly the potential tax revenue gain has become seen as an “easy” funding source for the various political parties to bandy about on new propositions. Any cut in relief carries double political capital with the perception of preventing the so called wealthy from “abusing” the tax system to amass huge retirement pots – whilst assisting the politicians to balance their books whilst offering vote chasing future manifesto giveaways.

It is interesting to ponder what effect this will have on future tax receipts and specifically on where higher rate tax payers may choose to invest as their pension funding headroom starts to run short. One possibility is the New Individual Saving Account, which offers a tax shelter for up to 30k per annum per couple but does nothing to defray tax payable in the current year. There are some other options for adventurous Investors with reliefs remaining on both Enterprise Investment Schemes & Venture Capital Trust schemes. One further option that remains open is a buy to let property or property portfolio – tax relief remains available for interest payable on any loan used to purchase the properties at the highest marginal rate of the owner. With so many politicians encouraging home ownership for the younger generation it is interesting to see how this move will help.

Note: This opinion piece was first published by Knadel Limited prior to the Catalyst-Sionic merger