UK pension deficits deepen further

The pension deficits of Britain's biggest companies have deepened over the past year despite the sharp rise in stock markets, new research shows.

The combined pension deficits of companies in the FTSE 100 reached £73bn at the end of April, up from £52bn a year earlier. For the FTSE 350, the deficit had increased to £88bn from £60bn.

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In the first meeting of our new cabinet George Osborne told colleagues that the need to get the budget deficit under control 'overshadows everything'. Some spending cuts have already been announced (all ministers are taking a 5% pay cut) but the scale of our national debt means much tougher measures are needed to balance the books.

The preliminary coalition agreement published recently suggested capital gains tax will rise. The expectation is an emergency Budget before the end of June when further tax rises could be announced. So far here is what we know:

Capital gains tax

The CGT rate might rise from the current flat rate of 18% and the annual £10,100 exemption could be reduced. This means any tax shelters, such as ISAs, pensions (SIPPs) will become even more valuable. Within an SIPP all gains are tax-free.

Income tax

It looks likely the tax free personal allowance for those earning less than £100,000 will rise to £10,000 over time, but the 50% tax rate for those earning over £150,000 will remain.

Tax relief on pensions

The Tories are happy with the current system, whilst the Lib Dems want to abolish higher rate tax relief. We believe higher rate taxpayers who are considering making a pension contribution this tax year might want to bring forward contributions.

Act now - secure your tax shelters

We believe it is vital that investors organise their affairs as tax efficiently as possible. Changes in tax are rarely retrospective. No one can say for certain what will happen, but you might want to play it safe by making use of your SIPP allowances sooner rather than later.

It couldn’t be easier to open a SIPP.

Please note this email is not advice and once invested within a SIPP the money can’t be accessed until retirement. Before you invest please speak with one of our recommended SIPP experts.