So it was with bated breath that Chancellor Philip Hammond stood to deliver his November Budget speech. Rumours has been swirling for weeks that pensions could be hit with changes to taxation. It was suggested that this would be to pay towards the NHS deficit among other things. It was with great relief that when he sat down and we reviewed the actual Budget papers that this was all just speculation and there was little impact. This can only be a good thing as any meddling impacts the distrust that consumers have for the pensions system and makes it difficult for advisers to plan for the long term with clients. How many times have we heard that PCLS or tax-free cash as it is more commonly known will be scrapped? Every Budget for as long as I can remember.
The flip side of leaving our pension system alone, is that some of the anomalies haven’t been ironed out or removed. These would include the issues surrounding the lifetime allowance. Since its introduction in 2006, the lifetime allowance has gone from £1.50m to a peak in 2011 of £1.80m back down to the current level of £1.03m. In fact in the latest Budget it was announced that it would increase again by CPI to £1.055m, it should have in fact been £1,054,800 but they have sensibly rounded this up, a little Budget benefit.



Removing the lifetime allowance would simplify pensions and eliminate the unintended consequence of penalising prudent long-term savers that have received good investment returns, or have put pension saving ahead of other expenditure. It just seems nonsensical that we can have a pension system that means advisers have to tell their clients to be more prudent in their long term savings, so as to avoid breaching the lifetime allowance, or breach it and pay the tax charge.

What would make most sense would be to remove the lifetime allowance and rely on the annual allowance to ensure that wealthy individuals don't just pile money in and reap the tax relief gains.

Being sensible about it, I guess it is all a bit of a pipedream as it isn’t as easy as you would imagine to remove the life time allowance. It would take a change in legislation and isn’t necessarily a vote winner, even if it is a sensible thing to do for all savers.

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Elaine Turtle, Director, DP Pensions