The Lifetime Allowance Changes For 2019/2020
In the 2015 budget, the Government announced that they were reducing the Lifetime Allowance (LTA) from £1.25 million to £1million. It was then announced that it will rise from the 6th April 2018 with the increase being inline with previous September’s Consumer Price Index (CPI), the CPI would be multiplied by the standard LTA at the time and where the figure is not a multiple of £100, it would be rounded to the next £100.
In September 2017, the CPI was confirmed at 3% and as announced in 2015, the LTA increased on 6th April 2018 from £1million to £1.03 million. Today (17th October 2018) the Consumer Price Index for September 2018 is 2.4%, therefore we now know what the Lifetime Allowance (LTA) will be for the 2019/2020 tax year, which has been confirmed as £1,054,700.
On 29th October 2018, Philip Hammond is to present the Autumn budget and unless any drastic changes are made to the current Lifetime Allowance rules, then it will be this new figure that will be confirmed then.
As a result of Brexit, the Government announced that the NHS will receive an increase in funding. It has been strongly rumoured that acquiring the funds would be possible if changes could be made on pension contribution tax relief or if there was a reduction of the current annual allowance. The changes are likely as pensions have been let off lightly in the recent budgets.
Our view is that that the Lifetime Allowance should be abolished completely and reduction made to the annual allowance. In doing so, pension savers will be limited to what they are paying in to a pension scheme and are at risk of receiving a tax charge at the beginning, instead of at the end when they wish to take benefits after a lifetime of savings into their pension arrangements.
For more information relating to the LTA then please visit our FAQ section on our website.