Henrys – High Earners who are Not Rich Yet – are not feeling very good about pensions that they were told a few years back were a harbour in which gains could be moored. As Alan Livsey points out in today’s FT , a move to reduce the overuse of pensions as tax shelters for higher earners follows the pension freedoms policy of former chancellor George Osborne in 2014.

With unused pension pots due to fall into the scope of inheritance tax from April 2027, those affected “risk seeing the tax advantages of pensions eroded both on the way in and on the way out, potentially leaving less overall for their families and loved ones,”

So what’s this iniquitous treatment of Henry and his friends? Well they work around the back of St Pauls in the City it would seem. Which coincidentally is where I live, though there any similarity to the financial Henry and me ends!

The reason why those earning over 200,000 could be  losing tax-breaks on their pension contributions has already been mentioned. His Majesty’s Treasury wants pension tax relief to pay pensions and not be used to mitigate the impact of wealth taxes like IHT or turn Henrys into genuinely wealthy tax-avoiders.

A desire by past governments to increase the tax take has meant that the taxable income threshold has not increased with inflation since 2020.

The £200,000 threshold would be worth more than £254,000 today if adjusted for inflation, though pay has grown even faster during that period.

Although the limit has been frozen, the standard contribution allowance was increased in 2023 from £40,000, partly to reduce the effect of the frozen threshold over time. This followed a drop in this allowance about a decade ago.

There are voices quoted in Alan Livsey’s article  , that show little sympathy for Henry but I suspect that most FT readers will be reading with dismay.

HM Treasury seem pretty level-headed in their response to challenge on behalf of the 600,000 who are losing out.

“The tapered annual allowance only applies to the highest-earning savers, ensuring the benefits of pension tax relief are targeted fairly towards those who need them most,”

Steve Webb points out that the progress of the Annual Allowance in the last few years has been driven by senior NHS consultants.

There is no doubt that successive cuts to the annual allowance during the 2010s had a negative impact, especially on senior NHS professionals. But a combination of a much higher starting allowance and a more gentle taper mean that the impact is marginal for most people. [Thus the income threshold freeze] is likely to be much less of an issue than it used to be.”

There are other issues at play here. As a nation we are waking up to there being 15m of us who will not have enough money in retirement to have even the  minimum standard of living they can expect.  The concerns of the 600,000 high earners that they must pay more for their extravagant lifestyles in retirement comes as no heart-ache for the majority of workers and pensioners.

The reality for Henrys is that even with reduced allowances, pensions remain a brilliant deal for investment and wealth creation. No one wants that to stop and few wish for higher tax relief to disappear. But if those who have the privilege of incomes in excess of £200,000 want to retain the tolerance of the rest of us, we expect no whingeing. The memories of the NHS consultant’s pension protests a few years back have not left a good taste in the mouth.