The amount savers are able to access through the pension tax-free lump sum has been capped at £268,275 after the chancellor scrapped the lifetime allowance as part of his Spring Budget.
Currently, the maximum amount that most savers can claim as a pension commencement lump sum is 25 per cent of their available lifetime allowance at the time this sum is taken.
The government has set a maximum cap of £268,275 (25 per cent of the current lifetime allowance).
However, those individuals who already have a protected right to take a higher tax-free lump sum will continue to be able to do so.
For some individuals, lump sums which are tax-free up to the lifetime allowance are taxed at 55 per cent on any amount taken above the LTA.
The government said today’s announcement ensures that, in such cases, these lump sums are instead taxed at an individual’s marginal rate of income tax.
Jon Greer, head of retirement policy at Quilter, said: “Hidden in the documents is a sting that people will now only be able to take 25 per cent tax free cash from their pension subject to a maximum of £268,275 so even if someone has a pension pot far bigger than the previous LTA this will be the most they can take out.
“However, those who have existing rights to higher TFC amounts will retain them.”
amy.austin@ft.com
