Like most other readers, I hate doing my tax return. I put it off until the last possible minute (or until I start to worry that my promises to my accountant that I am on the case are beginning to sound like lies). But this year the whole admin nightmare is gearing up to be even worse than usual. That's because, thanks to a mixture of enthusiastic pension-saving (I'm not as young as I was and that scares me) and a missing bit of admin, I have gone over my annual contribution allowance (which has fallen from £255,000 in 2010 to £40,000 for most people now, and a miserly £10,000 for high earners). And that means that I have to pay a (very difficult to calculate) tax penalty via my self-assessment form.
I'd like to tell you that I am alone in this misery. But I am not. Numbers out this week show that the number of people who have gone over their allowance, and therefore have to pay up, tripled in the past tax year from 5,430 to 16,590. The total take by HMRC more than tripled from £143m to a £517m. It's a similar story for the Lifetime Allowance: the number of people breaching the limit here (£1.8m in 2010, £1.03m now) and therefore having to pay extra has risen from 1,180 to 2,12, and the HMRC take has gone from £66m to £102m.
Most pension savers won't be bothered by these numbers they will think anyone saving £10,000 to £40,000 a year or building up a pot of more than £1m to be beyond sympathy. But they should be bothered. Because, as Steve Webb, director of policy at Royal London, points out, the tax bills are both "huge" and likely to rise as the ability to carry forward unused allowances from previous years (you can do this for three years) falls out of the system. That might not be nice news for savers, but it's great news for the chancellor, who will be "looking at these figures with great interest" as they suggest that fiddling with pension tax relief could be "a rich source of additional revenue". Save what you can while you can.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
On the plus side, all this does mean there is more money in my pension that needs to be put to work. I'll be looking at Max King's suggestion in the magazine this week of the Henderson Euro Trust and I'll also be thinking about putting a little money to work in Poland. Investment trust fans can do this via BlackRock Emerging Europe or Baring Emerging Europe. But owning either of them means accepting that around 60% of your investment will be in Russia. That may be fine (Russia is at least cheap) but if it isn't for you, look instead at the iShares MSCI Poland exchange traded fund (LSE: SPOL). It isn't as cheap as other ETFs (0.63%) and it is heavy in financials. But it is at least a pure play on a country that has seen 26 years of uninterrupted growth, and that is unlikely to be bullied into joining the euro and that is, says Matthew, still making "remarkable progress."
-
Landlords ‘positive’ about buy-to-let market despite Renters Reform BillNews New research has found landlords are not being put off investing in the rental market, even though the Renters Reform Bill is on its way.
-
Lloyds Bank unveils new pension service – is it any good?Lloyds is the first high-street bank to launch a ready-made pension service. How does it work, is it any good and who can save in it?
-
The myth of hypothecated taxesEditor's letter The government wants to add a penny on our National Insurance contributions to pay for social care. But it won’t, says Merryn Somerset Webb. It will just vanish into the black hole of our public finances.
-
Should capital gains tax be higher or lower?Editor's letter Capital gains tax is up for review. There are plenty of long-term arguments to be had about this. But in the short term, Merryn Somerset Webb has a few ideas for the government should it want a little cash inflow.
-
The best thing you can do for your children is to secure your own financesEditor's letter The "Bank of Mum and Dad" is now the 11th-largest mortgage lender in the UK. But giving your children money may not be the best way to help them, says Merryn Somerset Webb.
-
Inheritance tax: just abolish the entire thingEditor's letter Why not abolish inheritance tax and replace it with a gift tax on the recipients of unearned cash – wherever it comes from?
-
Good news for defined-benefits pensionsEditor's letter A rate rise or two could make the defined-benefits pensions deficit simply disappear, says Merryn Somerset Webb. In the meantime, there are a couple of things pension fund managers could do to help things along.
-
Don't get too relaxed about your pensionEditor's letter George Osborne might leave pensions alone for now, says Merryn Somerset Webb. But don't count on it staying that way.
-
Pensions: the counter-revolution
Editor's letter An awful lot of people are beginning to wish Geogre Osborne had never started down the path of pensions reform, says Merryn Somerset Webb.
-
Three pension traps for the unwary
Editor's letter Pensions Freedom Day is almost upon us and you're right to be excited, says Merryn Somerset Webb. Just watch out for these three pitfalls.
