Pension contributions for members of Group Personal Pension Plans will cost more from April 2008

Currently a proportion of all Personal Pension contributions made by members of Group Personal Pension Plans, is paid for by the taxman.

This contribution from the taxman is based on the prevailing basic rate of tax, at present the basic tax rate is 22% therefore for every £100 received by an insurance company in respect of a Pension scheme member’s personal contribution deducted from payroll, £22 will be paid by the taxman.

From April 2008 the rate of basic rate tax will reduce to 20%, therefore for every £100 received by the Pension scheme, only £20 will be paid by the taxman.

This means that from April 2008 for every £100 invested, employees will have to pay £80 instead of the current £78. This is not a massive increase but we recommend that Pension members are forewarned to forestall any queries regarding the increase. Employer contributions will not be affected, unless they match employee’s net contributions.