Act now or lose pensions tax relief

A GOVERNMENT minister has warned that high earners should act now to avoid losing out when a tax break worth thousands of pounds each year comes to an end.

The Treasury is understood to be lobbying for a radical overhaul of the pension contribution tax relief system. George Osborne announced a consultation on the tax breaks during the post-election budget.

The cost to the Exchequer of the tax relief is £35 billion annually.

The relief enables higher-rate payers – those earning more than £42,386 – to save £1 into their pension for every 60p they contribute. As many as five million people benefit by an average of £5,000 every year.

The minister, who declined to be named, told The Times: “Savers should grab a bargain at the closing down sale while they can.

“Many top earners don’t seem to realise what a generous tax break this is. It might even be worth some people borrowing to put in their pension.”

Such an unprecedented intervention from a member of the Government is likely to trigger a surge of pension in- vestment as wealthy savers move to exploit the relief before it is curtailed.

Tom McPhail, the head of pensions research at Hargreaves Lansdowne, who has contributed to the consultation, told the newspaper: “All higherrate taxpayers should assume the Treasury is about to turn the lights on and bring the tax relief party to an abrupt end.

“This tax year may well be the last one when you can still get the additional-rate top-up, so fill up with as much relief as you can, while you still can.”

The fate of the relief is not yet sealed, although some of the Chancellor’s offi- cials are understood to want to limit or remove the valuable relief for higherrate taxpayers.

The Government’s consultation will be published in October, ahead of the following month’s autumn statement.

Pensions experts anticipate that the relief is highly unlikely to be left unaltered following the consultation.

Fraudsters are targeting savers’ nest eggs after the introduction of pension freedoms, ministers have warned, with more than a dozen websites shut down by authorities.

Ministers have urged people considering cashing in pensions to be vigi- lant, warning that scams can be highly sophisticated and appear credible.

Under the reforms introduced in April, over-55s are able to withdraw their entire pension funds in cash. Experts have suggested this makes savers even more vulnerable to pension fraud, with thousands of people who choose to take advantage of the freedoms likely to fall prey to criminals.

Once cash has been handed over there is little chance of getting it back, regulators have warned. A Government-funded task force has so far led to 15 scam websites being shut down and several police raids.