Budget 2023: Scrapping of LTA to spark pension planning review
Following Jeremy Hunt’s game-changing Spring Budget on Wednesday, we believe there’ll be a rush to review retirement savings plans.
During his first full Budget as Chancellor, Hunt’s decision to scrap the Lifetime Allowance (LTA) will significantly ease the pension tension.
The LTA is the maximum amount people can contribute to a pension – it was £1.07m before tax charges were faced. When it was originally brought in in 2006, the allowance was originally set at £1.5m. It gradually increased to £1.8m in 2010 but fell to £1m in 2016.
As such, after a number of years of continual cuts and stagnation, this latest Budget announcement is a game-changer.
Indeed, and I was quoted by Evening Standard, London Loves Business, UK Daily News and Investors Chronicle, amongst other media, we welcome the Chancellor scrapping the LTA, which deterred individuals to save for retirement.
This latest development acts as an incentive to save as much as possible for retirement, along with encouraging older people to return to work, to boost the UK’s chances of long-term economic prosperity.
In addition, it once again underscores that retirement finances are increasingly a personal responsibility.
It’s becoming ever more evident that the government won’t be able to support its citizens as it has done in previous generations due to the ageing population and shrinking workforce; mounting living, health and care costs; weaker economic growth; less generous company pensions, if indeed they exist; and we’re living longer, so the funds have to stretch further.
Therefore, actions to promote personal saving, such as scrapping the LTA, should be advocated.
In addition, the Annual Allowance – which is the highest amount a worker can save in their pension pots during a tax year before paying tax – has risen to £60,000 from £40,000. This will also encourage saving for the future, which must be championed.
As such, this landmark budget will lead many individuals to review their retirement savings plans, not just in future years, but also in the current financial year.
Consequently, we expect a major surge in enquiries from clients as they, judiciously, review their strategies to make the most of the scrapping of the LTA.