The Chancellor has announced the Government's intention from 6 April 2011 to limit tax relief for individuals with an annual income of £150,000 or more. For those with income above this figure, relief will be tapered away so that for an individual earning more than £180,000, the relief available will be the same as for a basic rate taxpayer.

In anticipation of this change, there will be special transitional rules which will apply from Budget Day (22 April 2009) intended to prevent people from making large additional contributions to their pensions before 2011 in order to benefit from the higher rate of tax relief while it is still available. While the reasoning behind these transitional provisions is clear enough, they follow in the path of changes in treatment to ASP, IHT and tax-free cash recycling to move the pensions regime even further from the original concept of 'simplification'. While their impact is immediate, the detail may well change before the Finance Bill receives Royal Assent.

It should be remembered that these changes will not affect the vast majority of individuals and the way in which contributions are handled by Suffolk Life will not change. We will continue to reclaim 20% tax relief on net pension contributions and credit this to the plan holder's fund. For those who, subject to the new rules, are eligible for higher rate tax relief, the process of making a claim via the self-assessment process will remain the same.

For basic rate taxpayers and individuals paying higher rate tax with earnings broadly under £150,000 a year, paying into a pension is still likely to be the best way for people to save for retirement. Before 6 April 2011, those with income above £150,000 who maintain an existing pattern of regular contributions (as defined by HMRC) will still be eligible for tax relief at the higher rate.

Further details of the changes are available from HMRC's website at http://www.hmrc.gov.uk/budget2009/tax-relief-pen-cont.htm.