As the dust settles following the Chancellor’s bombshell abolition of the Lifetime Allowance, lawyers and pension consultants are looking at what has actually happened and what it means going forward.
Rosalind Connor of Arc Pensions Law offers an interesting opinion in Professional Pensions
Connor .. questioned the reason given by government for abolishing the LTA – that it would help avoid people giving up work because of the LTA charge.
She said this “seemed unlikely” as the charge only arises when a pension is paid, and there were plenty of arrangements that people can put in place to avoid accessing sufficient of their savings to hit the charge – adding the reality could be that the LTA had outlived its usefulness.
Connor said: “It is only speculation, but it might be possible that the LTA charge has become unattractive for HMRC and the Treasury. Probably, the majority of people who reach their LTA are well enough advised to make use of the various methods to prevent a charge becoming due.”
She added: “The administrative burdens of providing the protections may be quite significant on HMRC, and if the LTA charge is not bringing in much revenue, it may well make sense to remove the burden and the charge simultaneously.”
Much as we’d like to think that affluent people go to work to top up their pension, I think most of us would agree that the chance to re-enter the workplace to rejoin a pension scheme is low on the priorities of someone in their fifties who is already close to being a pension millionaire. If we all were in that position, wouldn’t that be nice!
I suspect that dispensing with the LTA was more opportunism than strategic policy. It has struck a chord with many people and excited interest in pensions nationally. Tom Mcphail is right to point to this budget as a “pension budget”
Best pension budgets of all time:
This is not open to debate
— Tom McPhail (@PensionsMonkey) March 15, 2023
Whether it will bring prosperity to people in later life , depends on how responsibly people act. That includes commentators, advisers , politicians and most of all the pension millionaires whose behavior will be carefully watched.
For most people, the LTA is a fairytale problem, few of us have Del Boy’s optimism
But those people committed to making pensions more adequate, fairer and predictable will not want to see the Minister for Pensions sideline by an unseemly squabble about needles and loopholes.
As the initial optimism recedes, the predicted backlash arrives. The skepticism of the legal profession is as nothing to the scorn for the reform from the front bench of the Labour party. Rachel Reeves, shadow chancellor, said Labour would force a Commons vote on the pension changes next week – laying down a marker for what a Labour administration would do if returned to power in 2024.
Reeves made her policy clear yesterday lunchtime , telling the BBC that a Labour government would reinstate the lifetime pension allowance and create a targeted scheme for doctors rather than allowing a “free-for-all for the wealthy few”.
Martin Lewis – bemused
Martin Lewis’ money show dealt with the pension reforms in around 90 seconds, with Lewis explaining that rich people should be filling their boots before while restrictions were off. Steve Webb has been suggesting this is just what will happen – with good reason
Labour’s pledge to reverse abolition of lifetime allowance could spark ‘gold rush’ into pensions, former minister Steve Webb says
People will maximise pension pots over next 2 years then cash out before the next election. The cost of the policy could end up being far higher
— Steven Swinford (@Steven_Swinford) March 16, 2023
This is not presenting a good look for pensions or the Government. People who have done the right thing, worked and saved hard all their life deserve better than to have their pension rights kicked around as a political football.
Pension decisions are quite complicated enough, without having to factor in ” political risk”. The idea of a pensions consensus in parliament was to allow all sides to offer predictability on which people could plan. Until Labour stabilizes what looks like policy on the hoof, the positive aspects of these reforms will be blighted.
Martin Lewis isn’t the only one looking bemused, I am – and you may be too.
Financial advisers can stabilize the situation with their clients.
So what of the financial advisers, who have so much influence on the planning of the wealthy? I do not see any evidence of them inciting a “free for all”.
This article , posted on linked in by IFA Kay Ingram is typically responsible.
Meanwhile, the FT has been running a clinic for its wealthy readers which included the following questions
I’m retired with a £2mn pension and have other assets. Should I sell them and put the proceeds into a pension pot?
What can I can do now to limit the impact of anything Labour might do?
I’m rich and worry about inheritance tax. What can I do to maximise my IHT benefits, assuming the new pension tax regime stays in place?
I am still working, but stopped contributing to my pension because I hit the LTA. Should I restart payments?
I am a buy-to-let investor. Should I sell property and put funds into my pension?
Fortunately, there are plenty of good advisers around who will answer these questions with calm and deliberation, They have the chance to ease concern that tax-avoidance will give way to tax-evasion.
There is nothing so easy to exploit as the rich person staring at the eye of a tax-loophole.