The lifetime allowance abolition is not actually happening as many of the figures remain the same, according to Claire Trott divisional director for retirement and holistic planning at SJP.
Speaking at the SJP symposium yesterday (January 25), Trott explained that while the name itself will be abolished, the LTA is still going to exist.
She said: “Although [the government] is abolishing the words lifetime allowance, they're replacing them with many other terminologies which all seem to use the same numbers as the lifetime allowance.
“There is no getting rid of £1.0731mn however much we beg, we will need to remember that.”
In the Autumn Statement the government confirmed it would scrap the LTA from early April, after it removed the lifetime allowance tax charge for benefits taken during the 2023/24 tax year back in Budget 2023.
However, almost immediately after the abolition announcement, shadow chancellor Rachel Reeves said the Labour Party would reverse the change.
Trott said it won’t be as straightforward as simply reversing the change and she suspects a bigger review of pensions generally if Labour were to win the next election.
She said: “It’s not going to be as simple as just ticking 25 per cent back on, it’s not that easy.
“At the moment we’ve got hundreds of pages of legislation to basically change everything, trying to reinstate it is going to be fairly painful.”
The two new lifetime limits that are going to be introduced are:
- A ‘Lump Sum Allowance’ set at £268,275 – a quarter of the current £1,073,100 LTA. This is the maximum someone can take as a tax-free lump sum (unless they have protection)
- A ‘Lump Sum and Death Benefit Allowance’ set at £1,073,100 – incorporating both tax-free lump sums someone takes while alive and lump sums paid on death.
Trott pointed out the incoming changes mean advisers need to be up to date with what is happening to be able to answer any concerns clients may have.
She said: “It’s important to have conversations and to be knowledgeable because you will always be more knowledgeable than clients.”
alina.khan@ft.com
