2021 Budget and Pensions - Morgan Lloyd Commentary

It would have come as a surprise if there were any significant changes to pensions ahead of the carefully managed leaks, but we can never be too sure what is lurking inside the Chancellor’s red box (who remembers the pension freedoms bombshell in 2014!)

So pension tax relief escapes reform yet again at a time when politically it would have been easy for Rishi Sunak to pretty much do what he liked without too much controversy. And bearing in mind that in recent years there has been talk of scrapping tax relief on contributions altogether and moving pensions to an ISA style product, the pension industry can be quite pleased with itself.

So it almost seems churlish to express dissatisfaction regarding the freeze on the lifetime allowance. From his kitbag of stealth taxes, the Chancellor not unexpectedly, announced that the upper limit on pension pots would be frozen for the remaining term of this Government, which in fiscal years means until 2026.

But it is right to express dissatisfaction as it was only 3 years ago that the then Chancellor, Philip Hammond, reassured us that the limit would be indexed in line with CPI, following a number of significant reductions from its lofty peak of £1.8million..

It may not seem significant now, but it is likely that the lifetime allowance would have reached £1.25m come 2026. So more and more savers, especially those in defined benefit schemes will find themselves entering this tax trap.

However for now, we can remain pleased that pensions have again been spared from any significant changes. But slightly disgruntled nonetheless!

John Dowding
Technical Director, Morgan Lloyd

The information above is based on our understanding of the legislation applicable to UK Registered Pension Schemes, and HM Revenue & Customs rules. It is provided as a summary only and should not be taken as advice - Morgan Lloyd SIPP Services Ltd and Morgan Lloyd Administration Ltd are not authorised to give financial advice and will not be responsible for any decision or action taken as a result of relying on this information. If you are a retail client you should seek financial advice from a financial adviser who is authorised by the Financial Conduct Authority and/or seek guidance from the Government’s Pension Wise service.