Recently there have been rumours that Rishi Sunak is planning to reform pensions tax relief to a flat rate of 25%.
Under the proposals, basic rate taxpayers could receive an additional boost to their pensions. Within the potential flat rate scheme, a basic rate taxpayer paying £100 a month into their pension could see this topped up to £133.33 rather than the current £125, an extra £8.33. This means a 22 year old on average pay of £27,000 paying 4% could be £21,000 better off by state pension age.
However, a higher rate taxpayer who currently sees their £100 increased to £166.66 would see this reduced to £133.33. A 35 year old earning £60,000 paying the same 4% could lose out by £85,000 or would need to contribute an extra £50 per month initially to maintain current retirement aspirations.
Watch this space for further news as announcements are made.