On the go: The pensions lifetime allowance will be frozen at just more than £1m until April 2026, chancellor Rishi Sunak announced on Wednesday.
Delivering the 2021 Budget, Sunak said the LTA will stay at its current level of £1,073,100 until April 2026, instead of increasing in line with the consumer price index.
Personal tax thresholds for both basic and higher-rate taxpayers will rise next year as previously planned, but will then also be frozen until 2026.
The LTA is a limit on the value of payouts from pension schemes — whether lump sums or retirement income — that can be made without triggering an extra tax charge.
Chris Noon, partner at Hymans Robertson, noted that this measure “is quite simply a knee-jerk reaction by the chancellor for short-term financial gain and comes just three years after the government committed to increase it in line with inflation”.
“It is bitterly disappointing to see him renege on this promise so soon and viewing those impacted by this change in pensions tax policy as necessary collateral damage,” he said.
Noon is worried that “the Treasury has far too short a memory”, as in 2016 it made “another knee-jerk introduction”, which was the tapered annual allowance “that eventually led to senior doctors, among other affected groups, refusing to do additional shifts”.
He added: “The taxation of pensions needs a fundamental review and the Treasury must resist this continued temptation to simply ‘tinker’.
“The inequities that remain in place must be addressed, alongside the unforeseen financial implications of Covid-19. Rather than penalise our pandemic heroes with rushed policy changes, they should work with the DWP and pensions community to develop.”
