Cutting the annual pension allowance to £50,000 has been welcomed by the industry, but the move has immediate implications for higher earners.
Treasury estimates suggest an annual allowance of £50,000 will affect 100,000 pension savers, but it says any unused annual allowance in one tax year can be carried forward to the following three tax years.
Additionally, to protect individuals who exceed the annual allowance due to a one-off "spike" in accrual, the government will allow individuals to offset this against unused allowance from previous years.
Legal & General (L&G) says the rule changes, to be introduced in April next year, present advisers with the opportunity to discuss with clients alternative routes for retirement planning, including ISAs, maximum investment plans (MIPs) and VCTs.
"Today's announcement is good news for people who need to save for retirement," L&G pensions strategy director Adrian Boulding says.
"It means high earners may need to consider useful additions for retirement planning, rather than paying the full rate of tax on contributions above the annual allowance."
While ISAs provide a tax-free investment up to a limit (£10,680 from next year), MIPs allow individuals to save much larger amounts over a ten-year minimum investment, in the form of a regular savings life assurance plan.
Clients pay tax at around the basic rate on their investment growth, paid by the life insurance company, so when they cash it in there is no further tax liability.
Investors can also make a bigger dent in their tax bill by putting their money in a VCT or enterprise investment scheme (EIS).
Patrick Connolly, spokesman for AWD Chase de Vere, says: "Advisers will be assessing these tax efficient vehicles for their clients anyway, but with today's changes, clients may want to re-visit this."
Members of defined benefit (DB) schemes are set to be particularly impacted by the changes, and Connolly says it will be prudent for advisers to assess the impact of their clients' employer contributions.
Harry Katz, principal at Norwest Consultants, says the changes are welcome as they simplify the pensions landscape but now is the time for advisers to check couples are fully utilising their individual pension allowance of £50,000 each.
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