LTA limit removal (part two)

Whilst remaining apolitical, we must be cognisant of the goings-on in all areas of UK politics. The current furore within the SNP does make a Labour General Election win next year more probable. We are therefore re-visiting the Lifetime Allowance removal from the last Budget as Ms Raynor has restated categorically, that if elected, Labour would reverse this, replacing it with a rule for NHS doctors to “stop them leaving”.

Please note the use of the words “if”, “could”, “potential”, etc. are used in this blog as a year in UK politics is a long time and forecasting results makes mugs of us all...

The planning opportunities for those clients (those outside of the NHS, judiciary and very few others) who are able to take advantage of this reprieve, could do so before the limits are potentially reimposed.

A quick recap:-

The lifetime allowance is the total amount you can have in all your pensions together over your life without incurring a tax charge. The standard lifetime allowance is currently £1,073,100. From 6 April 2023, the lifetime allowance charge has been removed.

The maximum pension commencement lump sum will however remain at 25% of the above figure, so £268,275

The other key changes are:

1. The annual allowance for pension contributions has increased from £40k to £60k per annum.
2. For those who have already accessed income flexibly, the money purchase annual allowance has increased to £10k.
3. The adjusted income level for tapered annual allowance has also increased from £240k to the new level of £260k per annum.

From April 2024 the lifetime allowance is set to be completely abolished. The following paragraph is taken direct from the government website:

“At a future fiscal event, the government will make the necessary changes to entirely remove the LTA from pensions tax legislation. Consequently, this measure also removes the need for individuals to rely on protections from previous decreases to the LTA.”

For those wanting to see the entire policy paper, here is the link: Pension Tax Limits

As 2024 will also be the year of the next General Election, it remains to be seen whether this proposed “entire removal”, and indeed the current increases to allowances, will be reversed. As seen from the quoted paragraph we are told there will no longer be a need for the numerous different protections previously available, however it is important to keep in mind that a change of Government could instead add more layers of complexity.