Pensions - Articles - ACA comment on reduction in pension tax lifetime allowance

 “Each time the LTA reduces it significantly increases the number of people caught by the limit. Someone who has amassed a pension with a value of £250,000 by the age of 40, or pension of £12,500pa might well breach the Lifetime Allowance by the time they get to 65. In the public sector, where DB remains the principal type of provision, the Government is clawing back pensions by the back door. And for DC members, the reduction in LTA further disadvantages them compared with DB members, who effectively get a higher rate of relief.

 “This lowering of limits creates uncertainty and puts people off saving for retirement. It also makes choices at retirement much more complex which will be a challenge for Pensions Wise, the new Government guidance service. For example people who are close to the Lifetime Allowance might find that taking more tax free cash can increase, reduce or eliminate the charge.”

 “Indexation of LTA from 2018 could easily be dropped by the next Government. We have called for a fundamental review of pension taxation after the election to address the anomalies and complexities of the regime.”