Tax relief on pension contributions - are we better off?

This month I have included an article for clients about the proposed changes to the rules regarding tax relief on pension contributions in the Uktaxworld newsletter. Readers may be interested in the following comments on the article sent to me by Nigel Moon of Reeves of Canterbury.

" ... whilst the £255k annual allowance is reducing, there are the anti-forestalling provisions currently in place that mean that (despite the £255k) higher rate tax relief for many people could be restricted currently to contributions as little as £20k ....

Under the proposed rules, higher rate tax relief will I believe be available on the £50k (though nothing on the excess, indeed there will the horrible excess charges) so in terms of tax relief some/many may be better off under the new rules.

With regard to the "spike" you mention, the draft legislation indicates that if someone belongs to a pension scheme in the three preceding years but has not paid up to the £50k limit then he can use the shortfall in the later year i.e. he could pay up to £200k if nil paid (though a scheme member) in the earlier years - or say £140k if he'd been paying £20k pa.

This latter seems to be producing a bit of a windfall to some - I think this might be the point referred to in a recent FT article - in that if someone had been paying £20k from 2008/09 to 2010/11 for example (in latter years to keep higher rate tax relief) then he can make up the shortfall and get relief in 2011/12 by paying £50k + 3 x £30k.

Of course, all draft thus far ...