The Chancellor's Pre-Budget Report amounts to a £2.3bn raid on pension schemes, according to Skandia.
Pension savers are among the biggest losers from Alistair Darling's reforms, Skandia claims, and are losing tax breaks in three key areas.
The firm estimates changes in tax treatment for pensions will earn the Government an extra £400m a year by 2011/12, and savers will continue to suffer until at least 2016.
Freezing lifetime and annual allowances until 2015/16 will have a detrimental effect on many investors with larger pension pots.
Skandia says a worker who plans to retire 25 years after A-Day will now face the onerous 55% tax charge if their fund was more than £490,000 on A-Day, compared with £557,000 under the old regime.
Lifetime allowances were expected to rise each year, roughly in line with inflation, but the freeze means some savers may have made contributions which, in hind sight, they may not have made if they knew the lifetime allowance would be frozen at £1.8m.
Those investors who applied primary protection to their funds accrued prior to A-Day may still face higher tax charges than expected, as protected savings could still exceed their personal lifetime allowance due to investment growth.
Lastly, Skandia says protected tax free cash will also no longer increase as it is linked to the lifetime allowance, meaning some investors will not be able to claim as much tax free cash as they expect.
"The previous Chancellor famously raided pension funds in 1997 by abolishing the reclaimable tax credit on dividends," says Skandia's head of tax and financial planning, Colin Jelley.
"Whilst not as extreme, the current Chancellor seems to be emulating his predecessor in a smaller way."
"Once again we have changes to the tax breaks applying to pension schemes and the people affected will need expert financial advice more than ever to help them adjust their retirement planning strategies to take into account these most recent changes."
Contact: John Bakie, Tel: 020 7484 9805, e-mail: [email protected]IFAonline
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