From: "Tim" 
Newsgroups: uk.finance
Subject: Re: Personal pension strategy
Date: Wed, 11 May 2005 09:58:54 +0000 (UTC)

"Andy Pandy" wrote
> I can see them abolishing the extra tax relief
> on pensions for higher rate tax payers, ...

Hmmmm.  So, if someone would be a higher rate taxpayer both before and after
retirement :-

A contribution of £100 (gross) would be £78 (net) paid, with £22 tax relief
added-back [but no longer a further £18 "high-rate" relief].

OK, so "losing" £78 out of net pay just before retirement will provide the
following value after retirement:
The "fund" will be produced from the £100 gross contribution -- a quarter of
which can be taken as TFLS (assuming for now that this still applies in
future) and three-quarters as pension, taxed at 40%.  That's equivalent to
£25 + (£75 x 60%) = £70.

So, to gain benefits worth £70 (net) after retirement, the high-rate
taxpayer (high-rate both before & after retirement) will have to pay
contributions worth £78 before retirement.  Do you think he'll bother to
save to a pension then, or use other non-pension routes as John Boyle has
suggested??

If the TFLS is also scrapped by then, the HRTP would only get benefits worth
£60 from his/her £78 contribution..............