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Maintaining lifetime allowance is a “tax on investment performance”

Skandia head of tax and financial planning Colin Jelley has warned that maintaining the lifetime allowance creates an effective tax on investment performance.

The Treasury today announced plans to cut the annual allowance from £255,000 to £50,000 and the lifetime allowance from £1.8m to £1.5m.

Jelley had been lobbying for a removal of the lifetime allowance suggesting it acts as a tax on investment performance for those at the top end of the earnings scale.

He adds: “We are disappointed they’ve maintained the lifetime allowance – why penalise people whose funds perform particularly well? Effectively, by having a control of the funding level at £50,000 a year, they’re imposing a tax on people who have successful investment performance by retaining the lifetime allowance. That seems incredibly unfair – they’re trying to have their cake and eat it.”


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There are 2 comments at the moment, we would love to hear your opinion too.

  1. Hyman Wolanski (MD, Sippchoice) 14th October 2010 at 12:59 pm

    Bearing in mind the overall state of the country’s finances, today’s announcement from the Government is generally good news and it is churlish, at best, to whinge about the LIfetime Allowance being maintained (and reduced). The ‘incredibly unfair’ complaint raised by Mr Jelley has been with us since A-Day without any real issues and, in any event, individuals can usually crystallise their benefits if their pension fund approaches the Lifetime Allowance, thereby avoiding the ‘tax on investment performance’.

  2. I disagree with Hyman Wolanksi If you had a value in your pension of £1.6m you coud have protected it back in 2004/5, but if you were of certian age in your 40’s say and invested heavily over the period 2000-08 from below that point and then went over the now £1.5 cap you are being badly punished. Further the effective value of these funds as an annuity has fallen substantially since that short window of protection was made available. £1.5m will probably buy you 1/2 to 2/3 of what it would back in 2004. Further this tax hits you if you have managed your fund well? do we get a credit when the institutions loose us money. It also means people will bonds earlier as capital growth gets a punitive tax so why bother? This raid is worse than Browns. A fairer way would to tax at a higher rate an annuity level and set it at say £100,000; if a persons combined pensions could give them this then a higher rate tax would seem fair. The people who have grafted and saved are again being kicked by a lazy government.

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