Pension contribution rules change – again!

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Not long after Labour launched its assault on higher rate tax relief on pension contributions made by ‘super earners’ (prefaced by the introduction of the hideously complex interim ‘anti-forestalling measures’) the Coalition government has confirmed today that it will repeal these tax laws and replace them with a more simplified regime:

  • £50,000 – annual pension contribution allowance for all
  • unused pension allowance can be carried forward 3 years e.g. for ‘spikes’ in contributions
  • enforced from 5 April 2011 (although it could impact on some people now depending on when the pension scheme period runs to).
  • the lifetime allowance will also be reduced from £1.8m to £1.5m from 2012.

Although simplification of the previous rules is welcomed, it does feel like yet another kick in the teeth for successful owner managers and entrepreneurs who want to do the right thing in planning for retirement yet face severe restrictions on the amount of their hard earned cash that they can tuck away tax efficiently for future years.

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Entrepreneurs hold the key to bridge the wealth gap

Today’s Financial Times had an interesting article about the widening wealth gap opening between generations.

The synopsis is that the Baby-Boomers aged 55-64 hold double the wealth of Generation X aged 35-44. Worse still, it is believed that Generation X will never achieve the level of wealth of the Baby-Boomers given factors such as the fall in pension benefits (especially final salary schemes – now pretty much the preserve of the Baby-Boomer Generation!) and the rising fiscal burden falling on Generation X to support ever extending life expectancy (aside from our budget deficit).

It reminds of a recent conversation I had with a friend who was day-dreaming about winning the Lottery to achieve his financial and lifetime goals. Without wishing to shatter his illusions (I did!), we discussed the only real way to achieve financial success:

Building your own business.

This is the only way for most people to achieve financial freedom or even millionaire status. And a surprising number of everyday folk do. I’ve met many self-made millionaires. I’ve never met a lottery winner…

So if Generation X are to bridge the wealth gap with the Baby-Boomers, we need to encourage more entrepreneurs. More start-up businesses. More support for early stage and growing companies. Perhaps the creation of more micropreneurs…?

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