Life in the Lifetime Allowance
For those making substantial provision for their retirements, you will have no doubt mourned the steady decline of the lifetime allowance since 2010’s £1.8M threshold. Whilst not significant, the lifetime allowance is however now indexed with inflation (CPI).
At the turn of the tax year, the lifetime allowance (LTA) was increased by 2.40% to £1,055,000. Depending on what (if any) lifetime allowance protections you have in place, you could be liable to an ‘excess’ tax charge when you first access a pension worth more than the LTA. Remember, this covers the combined value of all your pension pots.
Thankfully, this slight increase could save investors £13,750 in 55% LTA tax if accessed as a lump sum. You can opt for a lower LTA tax rate of 25%, however the residual excess will still be subject to income tax when drawn upon.
There is plenty of pro-active planning opportunities for pensions nearing the LTA. Whether the decision is to take protection, continue saving or even how to access the excess, we are well-versed in the both the minutia and management of pensions, and how they can support your wider financial planning.