The controversial lifetime pension fund has been silently raised from £1.5m to nearly £2.5m after criticism that the new pension regime favours final salary over money purchase.
The increase in the limit – by up to £1m depending on the circumstances of the individual – stems from the Inland Revenue responding to criticism that defined-contribution members should have access to the same £75,000 annual income as those in defined benefit schemes.
The change, which is buried within the provisions of the Finance Bill, means a 55-year-old male could now get a £75,000 a year LPI indexed joint-life annuity worth up to £2.5m without hitting the lifetime limit if it is taken as a scheme pension arranged by the product provider.
People taking income drawdown or alternatively secured pension will be limited to the £1.5m ceiling.
The change will also affect the decision whether to go for primary or enhanced protection.
Standard Life senior technical manager John Lawson says: “The Inland Revenue has effectively raised the lifetime limit for those taking their fund as income. In the longer term, this will affect more and more people because the lifetime limit is indexed to prices not salaries.”