On Tuesday, the House of Lords made very clear their objection to the Chancellors decision to attack 40% pension tax relief for those earning £150,000 a year. Their key criticism was that the changes were too complicated, retrospective and damaging to the ethos behind pension planning. As many of our clients will know, I am not a fan of pensions – their saving grace is the tax relief achieved on the contributions, which is invariably worth the pain of locking money up in a pension (albeit with much improved flexibility and access since “A-day”).

The number of people and amounts of money involved are relatively insignificant when compared to other aspects of public finance. In practice, there are already existing restrictions on pension payments:

1. Payment cannot exceed of 100% of earnings (capped to an absolute maximum of £245,000 in 2009/10
2. The total value in a pension cannot exceed the lifetime allowance of £1.75m in 2009/10

So in reality most people will not contribute up to £245,000 towards a pension, even if they could it would use up 14% of the lifetime allowance in a single year.

Of course, a pension is an investment – so any payments into one will invariably be buying shares, which helps to grow businesses and of course stimulate/repair many ailing companies. The implications of messing around with a fairly clear system appear to have been poorly thought through.