Changing the IHT allowance could help foster the growth of a savings culture but not if it is at the expense of pensions, Adrian Lowcock has warned.
The head of investing for Axa Wealth said that any plans to change the IHT allowance to £1m would be welcome for many families who have ended up into the IHT bracket simply because of house price rises.
However, he warned against using pensions as a means to fund the IHT cuts. “Using cuts in pension tax relief for the wealthy is not necessarily the best way to finance this change,” he said.
“Creating a tiered structure for pension allowances makes the tax system more complicated. While the £40,000 annual contribution limit is still a lot of money, it is only those earning significant sums of money who could actually afford to contribute that amount to their pension.”
Under proposals from the Conservatives, people earning over £150,000 will have their yearly allowance gradually cut from £40,000, reducing to £10,000 for earnings of £210,000.
Jamie Smith-Thompson, managing director of Kent-based Portal Financial, says: “Policies such as this send a mixed message from the Government – on the one hand we have seen a number of positive changes, but then there are these announcements that risk reducing the incentive to save early.
“How can anyone be expected to save in confidence if the rules and allowances keep changing?”