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Budget Update – Pension Allowances
As expected, The Chancellor has announced some significant changes to pension allowances in his Budget with these changes relating to the Annual Allowance and the Lifetime Allowance.
It was widely anticipated that he would increase the Annual Allowance from its current level of £40,000 to £60,000 and this has been confirmed. The Annual Allowance is the tax relievable amount you can save each year into registered pension schemes, and whilst the limit has increased you should bear in mind that it is capped at 100% of your net relevant earnings.
The Lifetime Allowance is the amount you are allowed to hold in pension savings without incurring a tax charge. The current limit is £1.07 million, with the excess being taxed at 25% if taken as an income, rising to 55% if drawn as a lump sum. In an effort to keep people working longer, it was expected that we would see the allowance increased to £1.8 million, which would match the previous highest it has been. However the Chancellor has given a major boost to those with funds in excess of the current limit, or indeed anticipated to exceed it, by announcing that the Lifetime Allowance is to be abolished.
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