Paul Crichton
In the March 2023 budget, the Chancellor took the pension industry by surprise with an announcement to abolish the pensions Lifetime Allowance (LTA) – the amount you can build up in your pension savings without incurring a tax charge. Pension savings above this were taxed and the rate depended on whether they were taken as an income or a lump sum. The Chancellor removed the tax charge for this tax year and the allowance will be removed altogether from April 2024.
Does this impact on you? Possibly, if you –
- Have already applied for or received HMRC transitional protection certificate such as Fixed/Individual/Enhanced Protection before 15 March 2023.
- Have pension assets valued near or above £1m, whether in payment or not.
- Have been a member of a ‘defined benefit’ pension scheme and also hold pension assets in a defined contribution arrangement such as a personal pension.
- Have scheme specific protection for a lump sum (an entitlement greater than 25% of the pension value) for a pension set up before April 2006, which has not yet been paid.
The Lifetime Allowance has been replaced by two new limits –
Lump Sum Allowance – this is the maximum amount of tax-free lump sum that can be taken from all your pension schemes. This has been set at £268,275 (a higher amount can be paid if you hold one of the protections listed above).
Lump Sum and Death Benefit Allowance – this has been set at £1,073,100 and will include both tax-free lump sums taken while alive and lump sums paid on death (again higher amounts can be paid if you hold one of the protections listed above).
The limits may feel quite high, and you may think this does not impact on me but depending on how your funds are invested and when you intend to start taking an income it may well over time affect you.
Therefore, planning for your retirement is vitally important; good planning will help ensure that you are saving enough for your ideal retirement, be less worried about running out of money and when you die know how your family is financially taken care of.
Regardless of how much you have currently saved, taking care of it with good quality financial planning will help you and your family feel more in control.
Our partners at Verus Wealth Chartered Financial Planners can help you with all things pension as well as advice on your investments, ISAs, protections plans and more. They offer a free initial meeting.
Have a look at their website and get in touch if this is of interest and we’ll put you in touch.
Verus Wealth – Award winning Dundee based Chartered Financial Planners.