In the UK economy we have  an ageing population which over time will make greater demands on public services and a  government who extoles the virtues of saving and planning for old age.  Yet actions seem to speak louder than words.  The recent budget limited higher rate  pension tax relief for high earners providing a further attack on building up pension benefits in a tax effcient manner.

The start of the process ocurred when Mr Brown as chancellor removed the tax relief on dividends received by pension funds.  This seems a small matter but has over time cost pension funds billions.

So does this matter if a few high earners will not receive tax relief on their contributions.  The answer is yes because it provides a fundamental shift in thinking that pension contributions do not have tax incentives attached to them.  Without these tax reliefs the argument for long term saving into pension funds becomes diminshed.

It will become easy for governments to chip away at the incentives and once this happens there is often no turning back.

But even more fundamental is the message it sends out to the public.  At a time when we need to save for our retirement the incentives are being diluted.  Whilst saving into a pension in contrast to other investment has its pros and cons it has meant for decades that people have put money to one side for their future needs and this is the crux of the argument.

A pension maybe not be very exciting but when the day comes when you need to stop working the size of your  fund will mean the difference between an enjoyable or spartan retirement. 

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