It seems incredible that just eight years ago the pensions lifetime allowance was £1.8m, and you could pay in £255,000 a year.
Today we are looking down the barrel and facing the potential for more cuts that could catch out swaths of workers who certainly do not consider themselves well off.
When the government started slashing away at the annual and lifetime pension allowances it said that fewer than 4 per cent of pots were more than £1m.
But this was hardly the point. The lifetime allowance in particular is a diabolical tax on aspiration – and sends a terrible message about sensible investment to those just starting out.
Now we find out that tax receipts from the restrictions on annual and lifetime allowances are soaring.
Official figures showed that £382m worth of pension contributions bust the annual allowance of £40,000 in 2016, giving the Treasury an extra £150m. It caught out 18,930 savers – up from 7,150 in 2015-16. At the same time, some £102m was raked in from savers who went over the lifetime allowance of £1m for that year.
The cuts to the lifetime and annual allowances were always going to catch out more people than the Treasury estimated.
That most of the pension cuts have come under a Conservative government is particularly hard to stomach – though I admit it is not out of character for a party that has seemingly become thoroughly anti-business, despite their recent party conference attempts.
The Tories should be pro-aspiration. The message from investing in a pension should be that there is no penalty for sound investment. In that respect they should scrap the lifetime allowance altogether.
Sure, those on the left would moan, but they have already shown no understanding of financial personal responsibility.
I believe most people in Britain want a society where their own prudence is rewarded so that they do not have to rely on the state.
Grudgingly I admit that the scrapping of a lifetime limit may need to be coupled with a reduction in the annual allowance, to say £25,000 – but that is more than generous enough for nine in 10 workers.
This would send the correct signal to the millions now invested in pensions: save wisely, invest well and you could build up a pension scheme beyond your wildest dreams. There is a caveat to this, of course.
It is time to split the rules for defined benefit schemes. They should still have a lifetime allowance and the calculation for this should be altered to reflect its real worth. So instead of 20 times annual income, it should be around 40 times. Maybe then those in the civil service would realise just how valuable their pensions are.
With these restrictions you could then get rid of the dastardly and utterly confusing tapered annual allowance that almost no-one understands.