Over 55s will experience restrictions in available tax reliefs as part of the government’s anti-avoidance tax strategy which will close loopholes created in the pensions reform announced in this year’s Budget.

The Treasury said that the government will restrict tax reliefs on pension contributions for savers over the age of 55 in order to prevent individuals transferring their salaries into pensions and then withdrawing funds to avoid paying income tax and NI.
Under new pension rules, individuals will be free to utilise their pension funds when they wish from the next year. However, regulatory bodies have expressed concerns about the ‘recycling’ of tax-free cash.
But new anti-avoidance rules will bring in an annual £10,000 cap on future pensions savings once an individual accesses their pension fund under the new reforms. For people who do not access their pension pots, the full £40,000 annual allowance will remain applicable.
Anti-avoidance rules were put into place after the government noticed that pension annuity sales suffered a drop, suggesting that savers were waiting until next year’s reforms are implemented.
David Robbins, senior consultant at Towers Watson, said: “It was always inevitable that the government would do something in the current political environment that would limit people putting money into a pension and then taking it straight out to save tax as a result.”
The government will be ‘closely monitoring’ the effect of the new pension rules and the behaviour of savers to ensure that the new system will be fair and accurately enforced.