Taxes on pension contributions could increase in autumn as part of spending plans being considered by the Treasury.

As such, pension savers should act now to reduce the financial impact of a possible stinging, stealthy raid on their pensions.

It was announced on Monday by The Daily Telegraph that “well-placed sources” are considering various ways of raising funds to pay for the coronavirus pandemic, and are devising plans to alter the way pension contributions are taxed. 

As I was quoted by FT Adviser, amongst other media outlets, the report stated that one proposal is to reduce the pensions lifetime allowance (LTA) from £1,073,100 to £800,000 in the next Budget.

As we’ve seen, governments over the years have history of viewing pensions as easy targets when it needs to raise funds.

Due to the fact this proposal of cutting the pensions lifetime allowance (LTA) has been leaked to the media, there’s a high probability that it will go ahead.

This would be a slap in the face for people who have worked and saved hard during their working lives, to be able to set aside money for their retirement.

The possible reduction of the LTA could impact more savers than you may think. 

There’s a far bigger group of people who should be taking action now to sidestep the financial hit of the potential lifetime allowance reduction. 

It’s not just people who already have a pension over £1 million. Others also need to see if future contributions and investment growth could put them in a position where they’ll be liable for a tax penalty.Yet so many savers are now aware of the impact of these potential actions by the Treasury on their retirement savings.

Nevertheless, there are several measures that can be implemented to avoid the fallout from the LTA reduction.

The steps that can be taken will differ according to individual circumstances. Therefore, professional advice is recommended.

As well as being a blow to savers, another cut in the lifetime allowance would be counter-productive for the country. Indeed, this move would act as a deterrent to save as much as possible for retirement, which would then impact the UK’s long-term success.

Monday’s announcement, I believe has merit, as the Covid crisis has provided the government with a reason for this potential raid on pensions. 

Therefore, I would urge people take steps to mitigate the hit, and seek advice as soon as possible.

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