Top up your pension NOW

Piggy bank © Getty Images
Put some money away before it’s too late

I’m about to write something I have written many, many times before. But it is just as important now as it has been on every other occasion. Here goes. If you can to up your pension before tomorrow’s Budget, do it.

Philip Hammond needs to find a way to chuck something into the social care pot. Pension tax relief is still costing us going on £40bn a year (even after the various fiddles and cuts of the last five years), so it may be that he cuts the annual allowance to £30,000 or even £20,000 (it is currently £40,000 a year if your income is under £150,000 and tapering to £10,000 thereafter).

It may be that he cuts the lifetime allowance again; it may be that he finally does the thing experts have been expecting for years and puts in place a flat rate of relief – so everyone gets 30% rather than their marginal rate of income tax back (the third is the least awful – if we want to see redistribution alongside a fall in the cost of tax relief).

I don’t really think he should do any of these things – in our ideal world Hammond gets rid of both the taper and the lifetime allowance. But he needs more cash and those who are “rich” in pension terms remain a pretty easy target (and one that hasn’t much of a leg to stand don when it comes to public complaining).

So if you are in the upper tax bracket, haven’t hit your Lifetime Allowance (now £1m), aren’t caught up in some hideous taper problem, haven’t yet used up your annual allowance and you have some spare cash (that you are sure you are OK to lock up until you are 55), stick it into your SIPP now. Tomorrow might be too late.

Merryn

Claim 12 issues of MoneyWeek (plus much more) for just £12!

Let MoneyWeek show you how to profit, whatever the outcome of the upcoming general election.

Start your no-obligation trial today and get up to speed on:

  • The latest shifts in the economy…
  • The ongoing Brexit negotiations…
  • The new tax rules…
  • Trump’s protectionist policies…

Plus lots more.

We’ll show you what it all means for your money.

Plus, the moment you begin your trial, we’ll rush you over THREE free investment reports:

‘How to escape the most hated tax in Britain’: Inheritance tax hits many unsuspecting families. Our report tells how to pass on up to £2m of your money to your family without the taxman getting a look in.

‘How to profit from a Trump presidency’: The election of Donald Trump was a watershed moment for the US economy. This report details the sectors our analysts think will boom from Trump’s premiership, and gives specific investments you can buy to profit.

‘Best shares to watch in 2017’: Includes the transcript from our roundtable panel of investment professionals – and 12 tips they’re currently tipping. The report also analyses key assets, including property, oil and the countries whose stock markets currently offer the most value.