In her first public statement after assuming office, Prime Minister Theresa May made clear her intention that her government’s policies should benefit “ordinary working-class families” rather than “the privileged few”. This suggests that any tax changes are likely to impact the better-off.

An increase in the top rate of income tax might be considered, but this would have the undesired effect of discouraging foreign investors. Much more likely for a cash-strapped government would be to return to the question of reducing tax relief on pension contributions, which are currently eligible for tax relief at tax-payers’ highest marginal rates.

Only last year the possibility was mooted of introducing a flat rate relief of 30%, which would provide a huge boost to the Treasury as well as giving an additional fillip to standard rate taxpayers. And the losers could be compensated by removing the lifetime limit on pensions savings, which currently stands at £1million and has been criticised as an unnecessary discouragement to younger pension savers.

The message, as always, is to take full advantage of tax concessions for so long as they are available.

Also potentially at risk could be the exemption of pension savings from inheritance tax. When the “pension freedoms” were announced, this was one of the most striking innovations, but even then questions were asked as to how long the concession might last.


So it would be rash to opt out of a final salary pension scheme purely on the assumption that a private scheme would provide freedom from IHT.


Nevertheless, the number of such schemes continues to decline. A YouGov survey in 2015 found that over half of the respondents who had already retired are benefiting from a final salary scheme, whereas only 37% of pre-retirees expect to do so. The open-ended liability to provide benefits has become insupportable for many employers.