Spring Budget

The removal of the pension lifetime allowance has gone a long way to help simplify pensions and is sure to tempt high-paid employees, such as NHS consultants, to stay in work for longer or even come back to work. Increasing the annual allowance from £40,000 to £60,000 also opens the potential for greater financial planning. For example, pension contributions reduce your adjusted net income, a factor when understanding your eligibility for 30 hours of free childcare. Now a household of two working parents can bring up to £200,000 and save £120,000 into a pension annually and still be eligible, assuming they both maxed their allowances.

The pension reforms announced are a positive step towards incentivising high earners to work and invest in their pensions. By increasing the annual pension contribution limit from £40,000 to £60,000, individuals with the means to do so will have more flexibility to save for their retirement. Furthermore, the removal of tax charges via the Lifetime Allowance for pension values exceeding £1,073,100 will be particularly beneficial to high earners, including NHS doctors, who have previously been disincentivized from working due to the pension-tax regime.

I think in relation to personal pensions this Budget is excellent news for savers. In recent years, more and more people have been caught in the Lifetime Allowance trap. By removing the allowance, there is a real incentive for people to continue investing in their pensions and keep working until their designated state retirement age. I have several customers who are approaching their lifetime allowance and this was pushing them into an early retirement even though they weren't necessarily ready to retire. This change will more than likely keep these people in work until they are ready to retire.

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 savers.