In his 2015 Budget, the then Chancellor George Osborne announced that the Lifetime Allowance (LTA) for pension contributions would be reduced from £1.25m to £1m from April 2016. It was also announced that the LTA would be indexed by inflation from April 2018.
As there had been a change of government in the meantime, there was doubt in some quarters as to whether the Treasury would implement this change. However, it has now been confirmed that the allowance will rise in line with inflation from April 2018.
The Treasury spokeswoman also confirmed that the increase will be based on the increase in the Consumer Price Index in the year to the previous September, and where this is not a multiple of £100, it will be rounded to the next £100.
So, although the increase is unlikely to be huge, it will bring some relief to those who are currently on the threshold of exceeding their LTA. If you’d like advice on any aspect of your pension and retirement planning, then do get in touch.
Tax treatment depends on the individual circumstances of each client and may be subject to change in the future.