Maximise pension contributions before budget day, says Skandia

Thursday 16th February 2012

With speculation surrounding the reduction of the annual pension allowance, those with money to put into a pension should consider doing so now, says pension experts Skandia.

Investors waiting until budget day, 21 March, to see whether the limit is reduced, may miss the opportunity to take maximum advantage of the current allowances.

At present, an investor seeking to maximise their pension allowance can then go back and utilise any unused allowances from the previous three years.

They can also invest early into the new tax year by closing the input period in the current tax year and opening a new input period for the next tax year ahead of 6 April.

The maximum annual allowance is currently £50,000, which means someone could contribute £250,000 by utilising all allowances in one go, provided the contribution does not exceed 100% of earnings.

If the maximum allowance does get reduced in the budget, it is probable that contributions paid on or after budget day will be affected by the new reduced limit.

"Slashing the annual allowance available on pensions is a real possibility,” said Adrian Walker, pensions expert at Skandia.

“The government seem determined to find a way to increase the personal allowance to £10,000, and reducing the pension annual allowance will mainly affect those that are more affluent.

"Maximising all available allowances is certainly something everyone should do, especially those who pay tax at 40 and 50%, and they need to take action now, before budget day."

Have your say on this story using the comment section below