James Jones-Tinsley: LTA axe – an ‘Unfinished Symphony?’

We’re now in the new tax year and the Lifetime Allowance has officially been abolished – well, for now at least. What do we call this new world? It was easy with ‘A-Day’, 18 years ago. Everyone, including HMRC and the government, called the supposed simplification of pensions by that name. And the pensions world that existed prior to 6 April 2006 was naturally referred to as ‘pre-A Day’. I’ve not, however, seen a universally-agreed phrase or acronym that captures life beyond the abolition of the Lifetime Allowance (LTA). “Post-LTA Day”? Possibly. “Ex-LTA Day”? No - sounds too reminiscent of Monty Python’s ‘Parrot Sketch’. I’ve got a suggestion, which also accurately describes where we are with the current state of legislation surrounding the Lifetime Allowance Abolition (or “LAA”): “LAA-LAA Land”! Readers of my column last month will recall how I was talking about the need for amending legislation, to amend the regulations that were brought out to amend the pension parts of the Finance Act 2024. Well, we’re still waiting for it. And HMRC’s ‘present’ to the pensions industry two days ahead of the new tax year – when arguably, everyone in the industry is at their busiest – was yet another Pension Schemes Newsletter, barely a week after the previous one. The principal aim of this Newsletter, (numbered 158), was to confirm where legislation was still required to finally ‘paper over the cracks’ of the existing legislation and regulations concerning the abolition of the LTA. All fine and good, you might say. However, one phrase that is continually repeated throughout this Newsletter is, “the government will therefore bring forward legislation…” and the glaring omission with this phrase is the lack of any indication of when that will happen. In the meantime, HMRC arguably adopts the stance of a quasi-Financial Adviser (and an unregulated one, to boot) by stating in the Newsletter that: “…members may need to wait until the regulations are in place before taking, or transferring, certain benefits. This is to ensure that their available allowances and tax position do not need to be revisited later in the year”. In other words, therefore, those individuals who are affected by the prevailing errors and omissions in the legislation are being told – through no fault of their own – to postpone their retirement, or drawing their pension benefits, or transferring their fund to another provider or country, until an as-yet-unknown date is reached! Consumer Duty anyone? And the uncertainty over Financial Planning doesn’t end there. We are, at some point between now and next January, going to have a General Election. If the polls are correct – and these may be influenced further, following the local and mayoral elections taking place in early May – we will witness the Labour Party forming the new government, and they have made no secret of the fact that they may be looking to reintroduce the Lifetime Allowance. Even though all the amending legislation outlined in the latest HMRC Newsletter will retrospectively take effect from 6 April 2024 once enacted, I personally doubt that a new Labour administration would seek to unravel all the legislation passed during the last year, in an attempt to ‘press the reset button’ to life as it was, before the Spring Budget of 2023. Instead, we might see ‘Lifetime Allowance 2.0’ being introduced, with its own monetary limit and other fiscal rules. If and until we reach that point, the current uncertainties facing Advisers, Paraplanners and Providers – and most important of all, their clients – will prevail. Welcome to LAA-LAA Land! James Jones-Tinsley is a technical specialist at Barnett Waddingham on SSAS and SIPPs practice areas. He also presents to clients, advisers and other professionals on pension matters, liaising with the media on changes to pension legislation. James D Jones-Tinsley FPMI APFS, This email address is being protected from spambots. You need JavaScript enabled to view it.

James Jones-Tinsley: LTA axe – an ‘Unfinished Symphony?’

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