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Borrow to make pension contribs as £750k AA looms – the media responds to tax consultation

by John Greenwood
January 25, 2016
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Speculation that the lifetime allowance could be cut to £750,000 is fuelling a last-minute rush to make pension contributions, as investors mull borrowing on credit cards to pay money in before perks are scaled back in April.

Media reports of the shutters coming down on The Daily Mail reports that the Treasury is looking at a £750,000 lifetime allowance for DB savers, with a £20,000 or even a £10,000 annual allowance but no LTA for DC investors.

Meanwhile a Telegraph journalist ran an article ‘Why I am borrowing £5,000 on credit cards to put in my pension’ this weekend, as pension consultants report interest from clients in borrowing to take advantage of tax relief while it is still available.

On Saturday the Telegraph ran a story headed ‘52 days left of 66pc pension boost: This is what you need to do now’, containing a section advising the groups of the population who should consider paying more immediately – additional-rate taxpayers, higher rate taxpayers over 50 and younger workers in highly paid careers.

Advisers report a surge in interest in making pension contributions, whether or not the individuals have the cash to do so, ahead of the predicted April changes.

Punter Southall partner Neil Latham says he has been approached by individuals looking to borrow money to pay into pension while tax breaks are still available, invest in cash, and then withdraw the money at a later date.

Latham says: “We can see the merits of such a strategy from a mathematics point of view. But this is something an adviser could never recommend because of the ethical issues they raise, and the uncertainty over anti-avoidance and recycling rules. The problem is that the speculation over the changes to tax relief is creating a buy-now-while-stocks-last mentality.”

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