Lisa Webster: 2024 – a tumultuous year in pensions

As the year draws to a close it seems appropriate to keep with tradition and reflect on what has happened in a defining year for pension tax rules. January/FebruaryWe started the year wrestling with the intricacies of how the lifetime allowance abolition was going to work in practice. The Finance Bill, published in November 2023, included 100 pages of legislation on its removal and was making its way through Parliament. Despite industry concerns about some of the detail, the Finance Bill received Royal Assent on 22 February (as Finance Act 2024) with no changes to the new pension rules. This included the provision to make further changes by secondary legislation. March/AprilIt didn’t take long for changes to be made. On 14 March new regulations were laid amending Finance Act 2024 before it even came into force. These corrected a few wrinkles – but by no means all. The new tax year brought the Act into force, but the lifetime allowance removal job was far from finished. We started the new regime with some clients in limbo, with HMRC saying those affected may want to wait until the rules were fixed before accessing benefits. The biggest impact was felt by those with certain protected lump sums, or with protection who wanted to transfer. May/JuneThe big news at the end of May was the shock early announcement of the general election. As the election campaigns moved to full throttle throughout June, government departments shut down, continuing to leaving those who couldn’t access their pension benefits in limbo.July/AugustOnce we had the election result the new government could get to work, albeit only for a couple of weeks before the summer recess. In late July, we at last got the draft regulations to fix the outstanding lifetime allowance issues. The industry responded by mid-August, suggesting changes that would finally finish the job of removing the lifetime allowance in the way intended. September/OctoberSeptember was quiet regarding the regulations to correct the Finance Act 2024; these were finally laid before parliament at the start of October. In contrast, the consumer press definitely wasn’t quiet with speculation that the new chancellor was considering cutting the lump sum allowance, maybe to £100,000. Cue panic in some quarters, and unprecedented levels of tax-free cash withdrawals from pension schemes. We finished October with the Budget bombshell that pensions will be included in estates for inheritance tax purposes from 2027 – the biggest change to pensions since, well, the lifetime allowance removal of 2024…November/DecemberThose outstanding lifetime allowance regulations came into force on 18 November, finally allowing all members to take their benefits as they should. We finished the year with HMRC casually dropping a bombshell into their December Pension Schemes Newsletter that invoking cancellation rights didn’t means that PCLS could be returned. This appears to be in contradiction to FCA COBS rules and is under discussion, so watch out for further updates in this area. 2025 Looking ahead, 2025 is unlikely to be calmer. Wrestling with complicated rules regarding how IHT is applied to pensions is likely to be at least as fraught as the lifetime allowance removal. 2024 – a tumultuous year in pensionsI hope everyone enjoys a peaceful break over the festive period before we head into the next tsunami. 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: 2024 – a tumultuous year in pensions

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