Overview

Baker & McKenzie reports that the Government has issued a discussion paper setting out its approach to the restriction of tax relief on pension benefits from 6 April 2011. It is looking to replace the Labour Government's policy of restricting tax relief for those earning over £130,000.

The restriction of tax relief is being considered in three areas:
• Annual allowance: the key proposal is the reduction of the annual allowance from the current level of £255,000 to between £30,000- £45,000.
• Lifetime allowance: given the proposed change to the annual allowance the Government is considering reviewing the operation of the lifetime allowance
• Capping tax relief at 40%: another option raised is to restrict tax relief on pension contributions to a maximum of 40%, which will impact those earning over £150,000 who are subject to the higher 50% tax rate

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