Pensions lifetime allowance to be abolished

In terms of the pension reform announced in the Budget, both the increase of the annual allowance to £60,000 from £40,000 and the abolition of the lifetime allowance will ensure more people are incentivised to remain in work and save for their pensions and will not have any tax disincentives to stop working. The pension rules are also getting simpler, which is another real positive. There has been no change to the tapered annual allowance so the very high earners will still not be able to contribute, but everybody else will benefit. Overall, this was a very impressive budget. Also, the fact that the OBR inflation forecast of 2.9% for 2023 is much lower than before is good news for interest rates and government bonds.

Older, wealthier workers will be able to put more into their pensions while many younger workers are stopping pension contributions because of the cost of living crisis. While welcome for some, this Budget was a missed opportunity to help struggling young people build long-term wealth and secure their financial future.

The Chancellor has really pulled the rabbit out of the hat with the removal of the lifetime allowance for pensions. The general consensus was that this was going to be significantly increased but by removing it completely and increasing the annual allowance to £60,000 he will help a lot of middle earners reduce their tax bills. In recent years, we have seen a great many customers get caught by the Lifetime Allowance and for them the logical thing to do has been to retire early. By increasing the allowance, the Chancellor has given a real reason for high earners to continue to work until their state retirement age.

This is great news for those who want to invest for their retirement. The Lifetime Allowance penalised those who had invested diligently and sensibly during their working life and discouraged people from putting money into pensions. This removes that barrier. In addition the increase in the Annual Allowance will encourage people to put more away for their retirement. Pensions are one of the most tax efficient ways to invest, and these policy changes make them even more so. Well done.

Jeremy Hunt has eliminated the lifetime allowance cap on tax-free pension savings, and the annual tax-free allowance for pensions will rise from £40,000 to £60,000. These changes will help simplify the pension system again and actively encourage people to invest more in their future. Our clients have reacted positively to this news and have already started asking us whether they should put more money into their pensions. This is very welcome and exciting news for a large number of pension investors.