Lifetime Allowance|Personal Pensions

Pensions: Lifetime allowance, state pension and the triple lock

Tom Edgington (BBC News website 15.03.2023) reports on the main pension changes outlined by the Chancellor Jeremy Hunt in his Spring Budget today. These include the scrapping of the lifetime allowance and increase in the annual pension allowance, as part of the government’s plan to get older people back into work. Excerpt below…

“The lifetime limit on tax-free pensions savings will be abolished, the chancellor has announced.

In addition, the annual tax-free pension allowance will rise to £60,000.

The changes are part of the government’s plan to get older people back into work, but most people are unlikely to benefit.

What are the pension lifetime allowance and annual pension allowance?

Pension lifetime allowance

This is the maximum amount of pension savings an individual can build up over their career without having to pay additional tax. The current £1,073,100 limit was due to last until 2026.

There had been speculation it would be increased to £1.8m. However, in the Budget, Chancellor Jeremy Hunt said the allowance will be scrapped altogether. According to the Treasury, the charge will be removed from 6 April 2023 before the allowance is fully abolished from April 2024.

The current allowance applies to private pensions (defined benefit and defined contribution). The state pension – a government payment – is not affected.

However, relatively few people are likely to benefit from the changes. Analysis by financial firm LCP suggests about 1.3 million workers are on course to breach the cap – less than 4% of workers…”

[BBC News online 15.03.2023]
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