PensionsJul 19 2017

Treasury confirms lifetime allowance increase

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Treasury confirms lifetime allowance increase

The pension lifetime allowance will go up in line with inflation next year.

A HM Treasury spokesperson told FTAdviser:  “As announced in 2015, the lifetime allowance for pension contributions will increase according to the consumer prices index from April 2018.”

She added:  "The increase will be based on the increase in CPI in the year to the previous September and where this is not a multiple of £100, it will be rounded up to the next £100."

The lifetime allowance is a limit on the amount of pension benefit that can be drawn from pension schemes – whether lump sums or retirement income – and can be paid without triggering an extra tax charge.

Its current level, since 6 April 2016, is £1m having been reduced from £1.25m.

Malcolm McLean, senior consultant at Barnett Waddingham, said there had been doubt as to whether the planned increase, announced by the then Chancellor George Osborne in his 2015 Budget, was still on the cards.

“There had been no confirmation of the intention subsequently before now, and with the changes in government many in the industry were surmising that the plan might have been shelved.

“Although the increase on the £1m LTA will not be huge, CPI increase is currently running at 2.6 per cent, it will provide some welcome relief for those currently on the threshold of exceeding the LTA.

“It might also suggest, that despite the fact the Chancellor will almost inevitably be looking to make savings on government expenditure, in his coming Autumn Budget, he will not be making further cuts to the LTA below the current level.

“That said and despite secretary of state, David Gauke’s recent “assurances” about the retention of pension tax relief I am doubtful that we can feel fully confident that pensions will escape totally unscathed from further cutbacks before the end of the present parliament.”