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Budget 2015: Govt cuts lifetime allowance to £1m; links limit to inflation

The Government has confirmed it will reduce the amount people can save into a pension tax free to £1m and plans to link the limit to inflation from 2018.

Chancellor George Osborne says this will save £600m. The lifetime allowance has been £1.25m since April 2014. It was previously £1.5m before being cut by the Coalition Government in the 2012 Autumn Statement.

Osborne also ruled out cuts to the annual allowance.

The annual allowance is currently £40,000. In 2013/14 it was £50,000 and in 2010/11 £255,000.

The Lib Dems and Labour have previously called for the lifetime allowance to be brought down to £1m, with Labour pledging to use the money raised to fund a reduction in university tuition fees.

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Comments

There are 9 comments at the moment, we would love to hear your opinion too.

  1. Based on current annuity rates, with a £1m pot, if you take an index-linkend option, you will be lucky to get much more than double the minimum wage.

  2. Can we please have a level playing field between Defined Contribution plans and Defined benefit when valuing the benefits for the calculation used for the LTA. This is hugely discriminatory for the DC world and blatantly unfair.

  3. Words fail me (other than unpublishable ones)

    Private sector employees (including civil servants and MPs) will be able to enjoy £50,000 index linked pensions on a £1 million LTA – but the vast majority with money purchase pension haven’t a hope of getting anywhere near that.

    Another round of fixed protection to add to Enhanced, Primary, FP12, FP14 and Individual Protection 14.

    How is anyone supposed to navigate this mess!!!!

    Just stick with limiting input!!!!

  4. I hope everyone contacts their local Tory candidate to ask them how they can justify this situation!

  5. Words fail me (other than unpublishable ones)

    Private sector employees (including civil servants and MPs) will be able to enjoy £50,000 index linked pensions on a £1 million LTA – but the vast majority with money purchase pension haven’t a hope of getting anywhere near that.

    Another round of fixed protection to add to Enhanced, Primary, FP12, FP14 and Individual Protection 14.

    How is anyone supposed to navigate this mess!!!!

    Just stick with limiting input!!!!

  6. @HH agree with you HH – limit the annual allowance going forward rather than retrospectively penalise those who have saved hard in the DC environment.

  7. Gypsum Fantastic 18th March 2015 at 4:48 pm

    Words fail me (other than unpublishable ones)

    Private sector employees (including civil servants and MPs) will be able to enjoy £50,000 index linked pensions on a £1 million LTA – but the vast majority with money purchase pension haven’t a hope of getting anywhere near that.

    Another round of fixed protection to add to Enhanced, Primary, FP12, FP14 and Individual Protection 14.

    How is anyone supposed to navigate this mess!!!!

    Just stick with limiting input!!!!

  8. Harrison Harrison 18th March 2015 at 5:14 pm

    Anyone got any idea whether the index linking of the LTA will also apply to those with one of the myriad of ‘Protection’ options that are now set to multiply even further?….i.e. if I have a client with fixed protection at £1.5m, will this £1.5m be index linked from 2018?

  9. Fair question Harrison Harrison, I suspect not because Fixed is, well fixed. Also it would take a very long time for £1M index linked to exceed £1.5M, or even £1.25M. The good news is past crystallisations are expressed as the percentage of the LTA used at the time, not the monetary amount, helps with crystallisations yet to come (a bit anyway)

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