Column inches galore were last week devoted to BP’s chief executive, Tony Hayward, and his £600,000-a-year pension, however little attention was given to what changes the Government are making to pension contribution limits. Luckily, we’re here to provide you with an essential summary of the weekend’s money sections.
“Radical” and “severe” proposals, according to the Financial Times and Saturday Telegraph, were introduced on Tuesday outlining plans to lower the annual allowance for pension contributions – the yearly limit for tax-advantaged pensions savings – from £255,000 to between £30,000 and £45,000.
Ian Cowie in the Saturday Telegraph said that at first sight, it shouldn’t present any cause for concern to most people who couldn’t imagine paying that much into their pension fund in any year. But the issue concerns the new ‘annual allowance’, coupled with a change in the way certain pension benefits are valued, which could hit many of those in final salary schemes – and land them with an unexpected tax charge on the additional amount.
According to Kathryn Cooper, writing in the Sunday Times, the industry has welcomed the move as a simpler way of cutting the cost of pension tax relief but the new plans could affect much lower earners in final-salary schemes. These changes replace proposals from the previous government that would have limited the amount people with earnings of more than £150,000 could pay into a pension with full tax relief. According to Alice Ross at the Financial Times, the new rules are expected to lead more employers to close their final-salary schemes in favour of defined contribution pensions, which are typically less generous.
In other news, much was discussed on household utility bills this weekend as cash-strapped families were told to prepare for higher energy bills in the coming months amid warnings that wholesale gas and electricity prices are rising faster than expected. Peter Vicary-Smith, chief executive of Which?, the consumer association, said in the Saturday Times: “On the one hand you have energy suppliers blaming high prices on the wholesale market and on the other you have British Gas announcing a massive increase in profits. For a consumer faced with a huge energy bill the two things just don’t seem to add up.”
This could potentially be bad news for those singletons out there as research in the Sunday Mirror from uSwitch.com found someone living alone will spend £11,904 a year on housing costs, bills and food, while those living with a partner only £7,110 a year. The difference adds up to more than £250,000 extra over their lifetime – but fear not, for there is a solution to hand, oh yes…
Isis Solar, an alternative energy firm, is giving away up to £288m-worth of solar panels to 18,000 households on a first-come first-served basis – saving families (or singletons) up to £16,000 in upfront costs and making the electricity generated effectively free.
Round-up from the rest of this weekend’s papers is as follows: