Pensions - Articles - LTA reduction is unfair, unnecessary and unwise says BW

 “From a pension point of view it is very disappointing that the chancellor has seen fit to implement a (further) reduction in the LTA from £1.25m to £1m from next year (albeit from 2018 it will be index linked).

  

 “Frankly this is unfair, unnecessary and unwise.

  

 “Although a million pounds still appears to be and is a very large sum of money, which clearly is beyond the aspirations of the average pension saver, it does mean that for a defined contribution pension pot it actually only produces an annual pension of little more than £27,000 (inflation proofed and providing for a spouse).

  

 “In many respects the concept of having a lifetime limit is outdated and unnecessary, now that the annual allowance has been reduced to £40,000 and is the effective controlling mechanism for limiting tax relief on pension saving. The existence of the LTA and the regular monitoring against it overly complicates pension saving at a time when strenuous efforts are being made through automatic enrolment and other measures to encourage saving into a private pension.

  

 “In my view the Lifetime Allowance is superfluous and unfair in that it not only restricts the level of tax relief that can be given but also imposes a 55% surcharge on those who perhaps through prudent management of their money and by securing good investment returns have unwittingly exceeded the limit.

  

 “Perhaps the time has now come or at least it is fast approaching where the lifetime allowance should be scrapped, an added bonus being that it would deprive politicians of the opportunity to tinker with it further for no good reason other than as political tactic.”