Lifetime allowance cut to cost £50m


Employers and pension schemes face increased costs of nearly £50m resulting from the lowering of the lifetime allowance from £1.25m to £1m.

From April 2016 individuals’ tax free pension savings will be capped at £1m.

The allowance will be increased in line with CPI inflation from 2018 onwards.

In a policy paper published today the Government estimates employers and schemes will be hit with a one-off cost of £46.6m and an additional £200,000 a year in running costs.

In addition, HMRC expects to spend £2.4m making changes to its IT systems to cope with the new protection regime and an increased volume of enquiries and an extra £500,000 on staff over five years.

Around 55,000 people will be affected by the cut in 2016 and 2017, the Government says.

As announced following the March 2015 Budget, the Government will net £1.9bn in savings from the changes over the next five years.

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.