Is a flat-rate incentive on pension saving on the way?

Clock face with the words TAX at the top - flat-rate incentive

Tax

MoneyPlus Features Team

28th January 2016 at 10:01am

Changes to how tax relief on money you save into your pension could be one of a number of measures announced in the Budget this March.

The current rates of tax relief – 20%, 40% or 45% depending on the rate of income tax you pay – look set to be replaced by a single, flat rate, which we wait to find out more about.

The proposed flat-rate incentive is the best chance we have of driving the levels of retirement saving needed to ensure that UK consumers are adequately prepared for retirement

As Jamie Jenkins, Head of Pensions Strategy at Standard Life, explains, such a change would mean the financial benefit of paying into a pension becomes much clearer and easier for people to understand.

“The proposed flat-rate incentive is the best chance we have of driving the levels of retirement saving needed to ensure that UK consumers are adequately prepared for retirement,” he says.

“This simple and clear single-rate incentive system would help engender greater personal responsibility by driving better understanding of, and  engagement with, pension saving.”

If in doubt about anything when it comes to your circumstances, it makes sense to take financial advice

If you save into a personal or a work pension and wonder what these likely changes could mean, it’s worth bearing in mind that they aren’t expected to come in for at least another year after any Budget announcement to give everyone the time to adjust.

Of course, pension planning can be complex, so if in doubt about anything when it comes to your circumstances, it makes sense to take financial advice, or you can find more information here.

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The information in this blog or any response to comments should not be regarded as financial advice and is correct as of January 2016. Tax rules depend on personal circumstances and can change in the future.