A new restriction on pensions in the Budget is plain wrong, said a Financial Times columnist.
Most people will think the reduction from £1.25 million to £1 million in the maximum you can have in a pension fund will not apply to them, but they are wrong. A pension fund of £1 million will produce an index-linked pension for life of under £30,000, and many people will be aiming for more than that. Under these rules, how close they are to their target will depend not just on what they save but on the return they get on their money, over which they have little control. So they could end up paying the penal tax rate of 55% on exceeding the £1 million threshold by accident. The columnist urged readers to write to their MPs asking that the limit should instead be applied to contributions, a system that would enable people to plan sensibly.
The new £1 million limit from April 2016 will affect many more people, who will need to review their plans and savings.