Much has been made of the changes to remove the lifetime allowance (LTA) announced in the Budget. The Labour Party have already stated that they would reverse the change with the possible exception being health service workers, so any opportunities may be short-lived.
These opportunities are for those wishing to have a more comfortable retirement and has also given those restricted by it an incentive to come back out of retirement (or carry on in employment), but it has also necessitated conversations to be had with all clients with previously arranged enhanced, primary or fixed protections. There have been a total of 7 different types of protections in place since 2006. If ever there was a need to ensure those who took out those protections to seek financial advice, it is surely now before they inadvertently end up on the wrong side of a binary choice. It isn't just the income, but also the commencement lump sums that were protected in some of these, so the new cap imposed on the CLS also requires immediate review by those reliant on larger sums...
The real winners are those higher earners who can pay in an additional 50% (max £60k) which has tremendous income tax advantages, especially now the 45% income tax rate is coming in at a much lower figure (£125,140 from previous £150,000). Interesting that this is almost exactly the increase in the pension contribution allowance!
Pension contributions can also be utilised to retain the personal tax-free allowance on income, where this would be reduced at the rate of £1 for every £2 a person has in excess £100k in adjusted net income. The effective rate of income tax on earnings between £100k and £120k would otherwise be 60%!
The changes have certainly reignited the pensions v. ISA debate.
As mentioned above, there is a definite pressing need for clients to talk to a financial adviser now, to guide them through these changes.
