UK Pensions Lifetime Allowance Set to Increase, if it Survives the Budget Intact
25 October, 2018
The lifetime allowance for private/occupational pension savings in the UK is expected to rise to £1.054m, up from the current £1.03m, with changes going into effect in April 2019. This figure reflects the lifetime sum individuals may save in a pension before UK tax charges apply.
The lifetime allowance is pegged to the official UK inflation rate of 2.4% as recorded by the Office of National Statistics (ONS) in September. However, any increase is dependant on the LTA surviving the upcoming UK budget unscathed.
With the Chancellor weighing up various options related to UK pension tax relief, trimming the LTA allowance cannot be ruled out. Savers hoping to make full use of an increased LTA must hope that the Chancellor leaves this projected increase intact..
Speaking to Moneywise, Tom Selby, senior analyst at UK investment platform AJ Bell notes, “Reducing an allowance that has just seen its first inflation-linked increase would seem odd and risks severely hitting vast swathes of middle Britain – particularly those in the public sector with generous defined benefit schemes.”
However, Mr. Selby goes on to note that a cut in LTA may be more straightforward than other options on the table—including reducing tax relief on pension contributions or reducing the pensions annual allowance.
Managing the potential impact of changes to the LTA on a person’s pension is a complex area. For UK expats living abroad, potential changes to the LTA are just one of many variables that impact the value of pension savings, and it is always recommended that a person seek ongoing financial advice to keep on top of ongoing changes and manage one’s investments as needed.