Pensions: the 10% cashback

So in the end it comes to this for the rich HRT (40% tax) payer: stick £1.5million into your pension fund, and the government gives you 10% - that's £150,000.

It used to be done in the name of pension planning, but under the new rules (from April2011), there needn't be any pension involved. As long as you meet the £20 000 pa minimum income requirement you can take all your cash out of your money-purchase pension scheme at age 55.

25% of that is tax free, and the 40% tax on that £375000 would have been £150000...... The figures work the same if you have £15,000 in your SIPP (self-invested pension plan), but that pensioner may struggle to meet the £20,000 pa income requirement, or pay 40% tax. And while £1500 is welcome, it is scarcely life changing.

it's true that even under the old rules, the 25% tax free cash effectively knocked the 40% tax payer into the 30% bracket. But now the process is more transparent, the income stream (aka pension) can be avoided altogether and the whole lot taken as a lump sum. Whether the rich need to be subsided to the tune of £150,000 under pension laws when there is no pension at the end of the process is a question well worth asking.