The past eight years have seen some radical changes in pension rules. We started in 2006 with ‘A Day,’ which was supposed to be a once-in-a-lifetime overhaul of the system. It soon became clear that it was anything but simple.
We’ve had a stream of changes to the rules in the intervening years. The Lifetime Allowance has gone down from its original figure of £1.8m and will drop again to £1.25m in April. In addition, we’ve seen a dramatic drop in the maximum annual contribution level from £225,000 to £50,000 – and it goes down again in April to £40,000.
While this won’t impact the average pension pot, it is affecting serious investors. Planning to maximise their tax position is a huge part of the advice service we offer and the constant reworking of large pension fund schemes is getting to be a bit of a joke.
My question to the government is: what message does this send out? Pension planning appears to be in the hands of our political masters, not the individual.
Individuals in the private sector are still disadvantaged in comparison to the public sector. You now need a fund of approximately £1m to purchase an index-linked annuity providing £20,000 per annum. Even those who wish to invest large sums in their pension funds are finding it almost impossible to do so without paying inordinate tax penalties.
Carl Lamb is managing director at Almary Green Investments