While I can empathise with those who view it as a tax on investment growth, I find myself in agreement with one adviser in particular – Alistair Cunningham – who said on Twitter that he viewed the LTA as a “target and not a limit” and that “..for many people avoiding the LTA charge at 25 per cent is as foolish as worrying a promotion might make you pay 40 per cent income tax not 20 per cent”.
There are other powerful reasons to keep on saving within pensions.
I haven’t even talked about tax relief on contributions to pensions (although they are subject to their own annual allowances) and the generous tax treatment of pensions on death of the member, potentially allowing pension wealth to cascade down the generations if unspent, free of inheritance tax in all but a handful of cases.
One size does not fit all in terms of retirement planning strategies. It would be boring if that was the case.
One thing is sure though, the best financial advisers and planners will be relishing the opportunity to demonstrate the value they can add in the retirement planning journey for clients and their families and distancing themselves from the unhelpful and at times misleading headlines many of those clients will be subject to.
Charlene Young is a senior technical consultant at AJ Bell
