A new interpretation of pension rules means investors have been given a golden opportunity to significantly increase pension funds in retirement.
Rules about carrying pension contribution allowances forward have been changed, giving pensions investors a great chance to increase their nest eggs, according to AJ Bell.
The new rules to carry forward pension contributions allows investors to make contributions in the current tax year where they have paid in less than £50,000 in any of the previous three tax years.
Where no contributions have been paid in the previous three tax years, investors can now pay in up to an additional £150,000 to bump up their pension pots.
The previous interpretation of the rules meant that an investor who had contributed more than £50,000 in either 2009/10 or 2010/11 was deemed to use up some of their annual allowance from earlier tax years, reducing the carry forward available to them now.
But that has now changed, meaning the annual allowance from earlier tax years is not used up where the £50,000 limit has been exceeded in either 2009/10 or 2010/11.
Figures show that an investor with contributions totalling £150,000 in 2010/11 would not have been able to make use of carry forward in respect of either the 2008/09 and 2009/10 tax years under the old interpretation of the rules.
The carry forward option is now available to them meaning they could potentially pay in up to £100,000 in carry forward contributions in the current tax year.
"This is an important change for any investors who intend to make use of the carry forward rules in the current tax year," Gareth James, technical marketing manager at A J Bell said.
"The old interpretation of the rules penalised those who had made sizeable contributions in the last couple of tax years. This change will provide investors with an opportunity to make larger contributions than had previously been the case.
"We've been working under the old guidance for more than six months so it is likely that the old interpretation of the rules was how the Government had intended them to operate. It is interesting that the new guidance has been released just before the Chancellor's Autumn Statement.
"If the rules are changed again tomorrow it is reasonable to question the timing of this announcement."
Learn about your pension options
For help or a pension quote call TQ Invest: 0800 294 7203
Looking for a pension to help you save for your retirement? TQ Invest can help.
Find an old pension – contact the Pensions Tracing Service on 0845 600 2537
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
Moneyfacts.co.uk will, like most other websites, place cookies onto your computer’s
hard drive. This includes tracking cookies.