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!
Technical Director, Morgan Lloyd
This information reflects the regulatory and taxation situation as it affects pensions at the time of publication in April 2017 and is provided to the best of our knowledge. It is not a complete representation of the pensions legislator landscape and is for guidance and information purposes only. We cannot be held responsible for any errors, omissions or subsequent legislative changes.