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<p>Pensions tax relief is one of the most expensive reliefs in the personal tax system.
In 2016/17 income tax and employer National Insurance Contributions relief cost over
£50 billion, with around two-thirds going to higher and additional rate taxpayers.</p><p>The
tapered annual allowance is therefore focussed on the highest-earning savers, to ensure
that the benefit they receive is not disproportionate to that of other pension savers.
Less than one per cent of pension savers will have to reduce their saving or face
an annual allowance charge as a result of the tapered annual allowance.</p><p> </p><p>For
those who incur annual allowance tax charges, the charge recoups the excess tax relief
on the benefits that they have accrued in that year above their annual allowance.
The charge is levied at an individual’s marginal rate. For example, an individual
with a salary above £150,000 would be taxed at 45% on pension accrual above their
annual allowance.</p><p> </p><p>It is not possible to estimate the precise effects
of the tapered annual allowance on an individual’s total remuneration without knowing
their specific circumstances.</p>
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