High earners should be making the most of their pension contributions this year, before the Government implements changes to pension tax relief, says NFU Mutual.

The HM Treasury has announced plans to restrict pension tax relief, so Sean McCann, tax specialist at NFU Mutual is urging high earners to make the most of their pension contributions while they still can.

Commenting on the proposed changes, a reduced annual allowance which is set to come into force in April 2011, he said: “It is vital that some high earners try to maximise this year’s tax-efficient pension contribution immediately. Someone with a yearly income between £50,000 and £130,000 should consider investing more of their savings and disposable income” before the changes come in. 

But it is not all bad news for high earners, Mr McCann continued, as the Treasury has also simplified some of the rules, which will benefit those with an annual income of more than £130,000.

Currently, tax relief is restricted for those with an income of more than £130,000. Under the new rules, full tax relief will be available on the first £50,000 of pension contributions.

The lifetime allowance will be reduced from £1.8million to £1.5million from April 2012, which Mr McCann says is “not great for pension savers”, but urges them to use this as an “opportunity to discuss their retirement planning with a financial adviser,” whatever their income.

© Fair Investment Company Ltd

Learn about the Fair Investment Pension Advice Service here »