Alan Steel AM warns beef up pensions now

Higher-rate tax payers should pile cash into their pensions this year, as it may not be possible to get 40% tax relief in the future, says the managing director of Alan Steel Asset Management (ASAM).

Upper bracket tax payers who have not earned over £150,000 in any of the last three years, making them exempt from the high earner rules, should be advised to use 2010 to put as much into their pensions as they can afford, urges Steven Forbes.

"It used to be pension contributions were a good way to reduce your tax bill, but with the recent legislation restricting higher rate tax relief, it is becoming more and more likely that higher rate tax relief may be withdrawn altogether in the near future," Forbes says.

"As a result I would suggest that any higher rate tax payer who is not caught by the high earner rules should put as much into their pensions as they can afford this year, as it may not be possible to get 40% tax relief in the future."

In last April's budget, the Chancellor announced for incomes above the £150,000 level, the value of pensions tax relief will be tapered down until it is 20% for those on incomes over £180,000. This makes it worth the same for each pound of contribution to pension entitlement as for a basic rate income tax payer.

Forbes says the recent tax changes mean investors need to broaden their horizons when thinking about where to place their money.

He recommends those with large share portfolios consider realising part of these in the current tax year, when any gains will be taxed at 18%, and reinvest the proceeds into offshore bonds for greater control over when tax would be due.

"Does it not make sense to look at the world as a whole rather than keep the vast bulk in the UK, a country of 60 million, heavily taxed, citizens? For those with stockbroker portfolios that tend to have a bias towards the UK, perhaps this is a question worth asking."