The Treasury will wait until 2012 to cut the lifetime pension allowance to give the industry time to work through the complexities of the change rather than pushing it through in 2011.
In October, the Government confirmed plans to cut the lifetime allowance from £1.8m to £1.5m. The Treasury said it planned for the change to operate from April 2012 but it has been consulting on the burden for schemes and employers of implementation in 2011.
However, an internal memo briefing civil servants on the implications of the pension tax changes indicates a final decision has been made and the reforms will be implemented from April 6, 2012.
The memo, seen by Money Marketing, says: “The Government has announced some major changes to the pension and tax regime. From April 6, 2012, the lifetime allowance will be reduced from its current level of £1.8m to £1.5m.”
A source says: “The industry pushed back on 2011 because people needed time to work this out. But other uncertainties, like RPI and CPI and the protection for people that exceed the £1.5m limit, remain undecided.”