Lisa Webster: LTA debate put to bed

The recent news that Labour has ditched plans to re-instate the lifetime allowance is certainly welcome. Since Shadow Chancellor Rachel Reeves’ pledge in reaction to the surprise announcement of the abolishment of the lifetime allowance, there had been an ominous shadow cast over the new rules and much speculation as to how long they will last. So, does this mean we are now in the clear? I’m sure most of you reading this will have been in the business long enough to know that’s rarely the case. In terms of the lifetime allowance removal, the job isn’t finished yet. There are several areas where the current legislation doesn’t work as intended. On 4 April HMRC released a pension scheme newsletter (number 158) stating that some of these issues will be fixed by regulations that will be made “shortly.” These regulations didn’t make it out before the election was called, and as they will be retrospective to 6 April 2024 and increase tax liability in some scenarios, these changes need to be approved by parliament. That cannot happen until we have a government, and given the time needed for regulations to come into force, we are likely looking at August. If Labour does form the next government as expected, then their U-turn on re-introducing the lifetime allowance does mean that getting these “tidying up” regulations approved should be a more straightforward process. Clients impacted include those with protected lump sums, those who have taken a lump sum after their 75th birthday (and still have further lump sums to take), those transferring overseas and those with enhanced protection who want to transfer. HMRC’s recommendation is that these clients wait for the regulations to be fixed. In practice if you have any clients in these categories who are wanting to access benefits then the first port of call should be to talk to the provider about the options available. There is also a potential impact for beneficiaries who take a death benefit lump sum from funds that were crystallised under the old rules. Once the lifetime allowance removal job is complete (and I wouldn’t rule out even more regulations following these ones) we can hope we have a period of stability in this respect. That doesn’t mean there aren’t plenty of other ways a new government could make changes to pensions. As the lifetime allowance debate is put to bed (for now at least), changes to annual allowances, tax relief, taxation of death benefits and the old debate about inheritance tax on pensions could all be stirring. Lisa Webster is senior technical consultant at AJ Bell. She is an economics graduate with over 15 years’ experience in financial services. Prior to joining AJ Bell in May 2014 she spent nine years working in senior technical and consultancy roles at a major SIPP and SSAS provider. She is part of the AJ Bell Technical Team. Email: This email address is being protected from spambots. You need JavaScript enabled to view it. Twitter: @lisasippster

Lisa Webster: LTA debate put to bed - for now

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