The latest research by tax specialists, RIFT, has highlighted how the recent changes to pension tax-thresholds, announced in last week’s spring statement, are unlikely to benefit the vast majority of taxpayers, with just 1% stating they currently contribute £60,000 a year towards their pension pot.
Last week’s spring statement saw the government announce a string of new changes to pensions, with the annual tax free allowance increasing from £40,000 to £60,000, while the lifetime allowance of £1,073,100 was removed entirely.
These latest changes are designed to help aid the growth of the nation, getting more people to work longer, while also hoping to tempt early retirees to remain on the payroll.
RIFT Tax Refunds found 36% of taxpayers believe that offering tax incentives on pension savings is an effective way of encouraging us to work for longer.
But while a positive step in theory, the changes came under fire due to the fact that they only offer the potential of a tax saving to the wealthiest taxpayers, who make the largest financial contribution into their pension pot.
In fact, of those surveyed by RIFT Tax Refunds, just 3% stated that they currently contribute more than £40,000 a year towards their pension and would therefore stand to benefit from a higher tax free allowance.
What’s more, just 1% stated they save more than £60,000 a year towards their pension pot, highlighting just how few stand to benefit from these latest changes.
However, while the government’s tax incentives seem to have missed the mark, 84% don’t believe that the government should increase the current pension age in order to force people to work for longer.
CEO of RIFT, Bradley Post said, “It’s clear that when it comes to incentivising taxpayers to work into the later life, the carrot is predictably preferable over the stick, with the vast majority not wishing to see the age at which you can draw a pension increase.
“However, it’s also clear that the government’s plans to increase the annual tax free allowance and remove the lifetime allowance will only see a very small number of taxpayers benefit, as the vast majority simply won’t be contributing anywhere near enough to their pension pot.
“So in essence, not much has changed for the average person and it’s a shame that they have been once again overlooked when it comes to the government’s provision of financial assistance in yet another budget.”