‘Relief blow will hit pension providers’

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Customs & Revenue slapped an immediate ban on anyone earning more than £150,000 a year changing their pension plan before new rules which come into force from April 2011.

From then anyone earning that amount or putting more than £20,000 a year into their pension pot will no longer receive higher-rate tax relief on their contributions. Until now high-rate taxpayers have had full tax relief on such contributions. That meant that for every £100 invested in a pension plan they effectively spent only £60.

Under the new rules everyone will get the same 20% tax relief, so £100 worth of pension pot will cost £80.

Blair Stewart, analyst at Bank of America Merrill Lynch, said this will mean pensions no longer look such an attractive method of savings and could well "affect the flow of money into the UK pensions industry in favour of more conventional bank or asset management products, cutting personal debt or even simple spending."