From 6 April 2011, the rules on receiving relief for pension contributions have been changed. The new rules restrict the maximum annual allowance to £50,000 from £255,000 (subject to the limit of 100% of relevant earnings).
Whilst this may appear to be a significant reduction, for the majority of taxpayers it actually represents an increase from what could be contributed on the most tax efficient basis, due to the complex rules in place over the past couple of years.
An additional welcome change is that unused allowances from the three previous tax years will be available for “carry forward” to the year in question.
Unused allowances in 2008/09, 2009/10 and 2010/11 will be available to carry forward into 2011/12 but on the assumption that the annual allowance was £50,000 in those tax years. This will mean that those paying less than £50,000 in these years will have additional allowance to carry forward from prior years to 2011/12.
We recommend specific advice is taken as to the maximum relievable pension contribution level for 2011/12.