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Will the budget pension lifetime and annual allowance changes help you?

17 March, 2023

The proposed change to abolish the lifetime allowance affects everyone that is not retired. The focus in the press is that this will benefit higher paid and wealthy individuals. However, whist it does help considerably, it also impacts younger people entering the pension saving area for the first time. Even with the basic auto enrolment contribution, they would be affected.

Where say 21 years starts contributing even on 8% the fact of incremental earnings and the power of compound interest they would crash into the Life time Allowance.

Currently the wise individuals saving for latter years have been penalised by the annual pensions cap and the life time allowance. I have seen this with doctors, civil servants and the local authority on final salary schemes with big tax charges with the LTA. 

One example for this is, I was in the A&E with my father sometime ago and I ended helping the consultant. Because he was full time with gold scheme, NHS then decided to do part time. He then decided to come back because he was needed and he delighted to help full time but this resulted by tax charge on the undrawn pension pot.

Pensions have not been addressed properly over the last forty odd years each political pundit decides to improve/ change and has chosen to layer legislation, not repeal so we have a mix of different scheme rules overlayed by the LTA it produces weird anomalies. It is a sensible step because people need understand that as a society, we all need to save, pension is one area and making it practical and unrestricted also everybody to provide for latter life.

You can still have inheritance tax relief potential before age 75 but most people tend to use the pension pot as an income generator which subject to income tax

Politicians need to make the pension easier to understand and to operate, as both an accountant and independent financial advisor this make sense, or we have all rely upon to the state to provide against a demographic of ageing population.

If you have not look at a pension update, then now is time to review.