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Release date: 07 April 2008
What’s happened?
In his 2007 Budget statement, the Chancellor of the Exchequer announced the reduction of basic rate income tax from 22% to 20% and the removal of the 10% starting rate tax band.
Will this affect me?
The change will affect all customers who are contributing to a personal pension, FSAVC or Stakeholder policy. In addition, some annuitants will see the tax deductions from their annuities change (either increasing or decreasing depending upon the level of payments and the individual’s tax code).
This change will not affect you if you make payments to a Retirement Annuity Contract.
What does this mean for you? – if you are receiving income from us
Any income which is currently taxed at the 10% starting rate will, from 6 April 2008, be taxed at the new 20% basic rate of tax. As a result, from 6 April 2008, anyone whose income falls, either partly or wholly, within the current 10% band will possibly pay more tax.
What does this mean for you? – if you are making pension contributions
The reduction in the basic rate of tax, from 22% to 20%, affects the amount of tax relief which we can claim on your behalf, in respect of pension contributions made after 5 April 2008.
You will find that, in order to keep your pension contributions at the same gross level, your payments will need to increase. Your new contribution levels are shown on the letter we have sent to you.
If you pay by Direct Debit – From 6 April 2008 all payments made from your bank account will be automatically adjusted to the new amount. Therefore, no further action is required of you.
If you pay by standing order - You need to contact your bank and inform them to increase the standing order to the new amount before 5 April 2008.
If you pay by any other method - Please refer to the letter we have sent to you.
Below is an illustration of how the tax rate change may affect your pension contributions
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